We quiz the FSA about the future of financial regulation
The way financial services are regulated is undergoing a radical overhaul. We talked to the Financial Services Authority about its plan for a new consumer-focused regulator (the FCA) and what it means for consumers.
What is the FCA?
The government is replacing the Financial Services Authority (FSA) with two new organisations: the Financial Conduct Authority (FCA) and the Prudential Regulation Authority. The FCA will aim to protect consumers and improve confidence in financial services and products.
The government recently produced proposals for the FCA’s powers and today, we’re publishing our initial thoughts about what the FCA should do.
Now we want your views. Whether you’re a bank customer or stock market investor, now is your chance to have your say by 1 September.
Why is this happening?
Simply put, the financial services industry’s record over the past 20 years hasn’t been good enough. Consumers have been let down, with widespread mis-selling leading to £15bn in compensation payments since 1990. A perfect example of this is the unsuitable selling and poor complaints-handling of PPI.
This wouldn’t be acceptable in any other industry, and it isn’t ok when it comes to something as important as your money. So the FCA needs to be different in the way it protects consumers.
What new powers will the FCA have?
This will be decided by the government and Parliament, but ultimately it’s aiming to be tougher and bolder. The FCA’s main aim should be to protect you, whether you’re a first-time buyer or an experienced investor.
The public needs to know they can trust the firms they’re dealing with. The new regulator can achieve this by improving choice when you buy a financial product, protecting you so there’s less chance of anything going wrong – acting strongly if it does – and improving the integrity of the financial system.
To improve trust, a strong regulator must have the power to intervene when it believes consumers are at risk. This means that the FCA could take action at every stage along the way – getting involved when products are being designed. The government has even suggested it should be able to ban some products – making firms withdraw or change misleading advertisements, and publishing warnings about rogue firms.
The government also believes the FCA should promote competition within markets, taking action where you’re being let down. Firms must value you as a customer and treat you fairly.
With these types of powers, the FCA will have wide-ranging responsibilities – overseeing about 25,000 firms, from high street banks to insurers and the London Stock Exchange. We believe that it can only be effective in doing this if it’s open and accessible to you, the consumer.
How will the FCA treat consumers?
We want the FCA to have a different attitude to the existing FSA. It needs to be more committed to understanding consumer behaviour, needs and experiences – you should be at the heart of what we do.
We recognise consumers have vastly different needs, means and understanding when it comes to their finances. The new organisation intends to protect consumers based on how informed they are and how capable they are of looking after their money.
So, those are our proposals and we’re really keen to hear your views. What are your experiences of financial services and what sort of regulator do you want in future? Are we on the right track with the FCA?
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