The FSA has today launched a discussion paper on consumer responsibility and said that it wants to explore what steps it or others could take to help consumers understand and protect their own best interests more effectively.
The protection of consumers is one of the FSA’s four statutory objectives and the discussion paper aims to provoke debate and bring greater clarity to the FSA’s approach to consumer responsibility.
Dan Waters, FSA director of retail policy & conduct risk, said:
“Responsible and well managed firms that treat their customers fairly are crucial. Indeed, to this end, the FSA is strengthening its supervision of firms through the Supervision Enhancement Programme and its Enhanced Strategy for Small Firms. All firms have been warned that they face stronger and more intrusive regulation to ensure they are aware of their responsibilities to treat customers fairly.
“However, we also believe that markets will work more effectively if consumers are more involved, more capable and empowered. While we do not regulate consumers, we believe that we can work with firms, industry bodies and other stakeholders to encourage and enable consumers to consider their own interests more effectively in their decision making.
“We acknowledge that this is a debate that elicits strong feelings on both sides and we are keen to try to find common ground in order to contribute to better understanding and better outcomes for consumers in financial services markets.”
The Financial Services Consumer Panel (FSCP) questioned why the FSA is focusing on consumer responsibility at a time when it claims “large| sections of the industry are not giving consumers a fair deal It says that this is not the time for the FSA to be debating responsibilities for consumers.
Adam Phillips, the FSCP’s acting chairman said:
“Clearly, the industry has been putting pressure on the FSA to increase consumer obligations. While we are not arguing with the need for consumers to answer questions honestly and read key information, the FSA document provides an opportunity for the industry to attack consumers’ rights, when it is the industry itself which needs to get its house in order and take responsibility for its actions. Over the past few months we’ve seen consumer confidence fall to unprecedented low levels. It’s also a time when many firms have been exposed as not giving consumers a fair deal, from the selling of Personal Protection Insurance (PPI), to pension transfer advice and dealing with mortgage arrears.
“We have told the FSA that this is not the time to be discussing consumer responsibility, and we will continue to pursue this line vigorously with the FSA over the coming months.
Although it might seem odd that the FSA should be seeking opinions about how to “force” consumers to act responsibly it must be argued that consumers insatiable hunger for finance over the last few years has contributed to the problems we are having. A better informed and educated consumer has to be good for all sides of the industry.