FCA head of department - consumer & retail policy Ian Searle, said: “It's much more likely to be unreasonable if there's no link between the price the customers pay and the cost of firms actually incurring to break the contract.
“That's the sort of key rule to apply. And that's what will be in the guidance.”
Searle said consumers will need to have understood this and firms will need to show consumers have understood.
The FCA also said that it will need to expand on its resources and hire more staff which raised concerns about how this will be funded.
Mills said the regulator will be bringing in additional resources, but argued that the FCA board “looks very closely” at the value that it provides and the terms of those fees.
He explained that the main costs for firms, certainly the firms that complained to him, is around the cost of failure in the Financial Services Compensation Scheme.
“The new consumer duty and other aspects of our three year strategy - in relation to tackling firms and ensuring they have the right prudential setting for their business - should, if it goes well, hopefully have an impact on those other costs which firms are facing because firms will be getting it right first time,” he said.
“Consumers won't need as much compensation and our efforts to make sure that firms have good capital, good solvency or fail well will have less impact on the FSCS.”
He added: “You have to see this duty in the context of our overall strategy as the FCA, it's not just this duty, but a whole host of other work that we're seeking to do.”
sonia.rach@ft.com
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