/ Money

The FSA’s break-up blossoms into a new romance

‘It’s not you, it’s me’. ‘I’m looking for something new’. While these may be common break-up excuses, today’s break-up marks the start of something beautiful. Find out why I’ve fallen back in love.

Today, the Financial Services Authority is officially toast. The regulator begins to enact the plans set out in the Financial Services Bill.

The regulator officially begins its split into two new bodies, the Financial Conduct Authority and the Prudential Regulation Authority.

For us Watchdog campaigners, this is a bit of a milestone.

Banks, building societies, insurers and major investment firms will now be supervised by both the FCA and PRA. By splitting its functions, the regulator will no longer need to keep so many plates spinning.

New love for consumers

The FCA will monitor the day to day conduct of these firms i.e. the stuff that matters to you and me. Are insurers’ policies suitable to be on the market? Are the banks treating us fairly and providing the services we need?

The FCA can focus on giving consumers some much needed TLC.

While we won’t see a radical change overnight, today does herald a change in approach for the organisation we rely on to keep the financial services industry in line.

We’ve been working to make sure the Financial Services Bill passes through parliament without any watering down of the new consumer protection powers.

Hands off our super complaints

There was, however, a problem with the wording in the Bill. It wasn’t clear that bodies that represented the financial services, such as trade bodies and banks, wouldn’t be able to claim ‘super complaint’ powers.

Thankfully, Yvonne Fovargue MP, noticed this needed clarification and secured a mini-victory for consumers. She persuaded Treasury minister, Mark Hoban, to amend the Bill to make it clear that super complaint powers shouldn’t be given to the financial services industry.

This was an important cue. Super complaints were designed as a consumer protection tool for organisations like us, Citizens Advice and Consumer Focus to bring to light issues of mass consumer detriment. You may remember our super complaint against ‘rip-off’ card surcharges, for example.

The power to make super complaints is a vital tool for consumer groups as they can be used to make the regulator investigate issues. Super complaints were never intended to be given to bodies that represent the industry. We were happy the government agreed and commited to making sure super complaints are limited to organisations that represent consumers.

Getting the Bill right

So now you know why today is so important, I’m sure you’ll now be sharing my excitement. And luckily for us, this isn’t all we have to look forward to in the next few weeks. Next up is the report stage of the Bill, which is where MPs will agree on what was decided in Committee. It then goes to the Lords where the whole scrutiny process starts again.

While we’re generally happy with the Bill, there are still a few things that we think need to be improved upon to make sure the mistakes of the past aren’t repeated, such as the FCA being transparent and publishing its agenda and board minutes.

Our primary focus is to avoid another bank charges test case, where banks have been allowed to charge disproportionate charges. The Bill needs to make clear that the FCA will have the power to prevent hidden charges, otherwise we’ll all feel like we’re being ripped-off.

Are you hopeful that the FCA will work in the interest of you and me and bring the banks into line? Or do you think this love affair will be short lived?


I’ve said it before and I’ll say it again, until regulation (across all areas of business) reverts back to enforcement from it’s current state of “advisory” then very little will change.
If the FSA operated “failed and inadequate regulation” policies when it followed the advisory regulation of the Hampton principles – after taking advice from “stakeholders” (read: big businesses) – and admitted itself that they failed to regulate in the interests of consumers (FSA report into RBS’s near collapse and £45 Billion taxpayer bailout) then why do regulators across the board – including the new FCA – continue to allow government to tie their proverbial arms around their backs and have them put “the needs of the business” before the needs of consumers?

Why do which? and other consumer bodies not campaign for action on this?
Are you not there to represent consumers? Are you not supposed to be fighting our corner?
Or are consumer bodies (which are able to submit super complaints) in the same boat as regulators, whereby they don’t want to lose their funding/influence in the areas they operate (protecting their own)?

One shining example is the orange price changes mid contract debacle.
Regulator neglected the people paying it’s wages by not persuing the case for the people, instead referring people to a body that had already stated it was beyond their remit and couldn’t help.
Consumer bodies may have blogged about it, but was a super complaint forthcoming?
If not, why not?
From what I’ve seen people who posted compaints to consumer groups and registered complaints with the regulator were to all intents and purposes, completely ignored and left to fight their own corner. Disgraceful!

Big business dictates regulation, it shapes regulation and as you’d expect they use this position to make maximum profits from their customers.
Will the FCA change this?
I doubt it very much.
Even here on which? people posted questions to the top brass at the FCA and almost all were not answered in his reply.
Vague promises to “take the experiences into account” and “deal with problems before they happen” don’t instill confidence at all. Hardly stuff to make big businesses sharpen their act up is it?

I don’t want regulation and consumer laws made up by and decided upon by the head offices of big businesses.
I don’t want a regulator that has to consider the “needs of the business” before any proposed action can take place.
I don’t pay for a regulator/enforcement body that “works with business” and is in a position – due to the crazy regulatory laws – that they have to notify the business before any action can be taken.
I don’t want a regulator to allow a business to submit it’s own, limited, information in respect of a complaint.
I don’t see why a complaint must be backed up with thousands of identical complaints before an issue is even looked at by an enforcement body/regulator.
It shouldn’t be almost impossible for a business to lose it’s “compliant” status with a regulator and the benefits of no inspections that comes with it. (Look at edf energy farce – complaints up, “compliant” status maintained, fined just £1 and makes donation to CAB and vulnerable customers which will be clawed back from customer’s bills, weeks later given a multi million pound contract by the government!)

Taxpayers fund regulators to protect them from sharp practices, the link between businesses and them are too cosy and close.
The FCA and others continue along this route…. “Ripoff Britain” will remain.

Rosie says:
15 May 2012

Oh how good to see such sense spoken!

Michael Kovari says:
19 April 2012

The Bill should make it possible for the FCA to ban all inertia selling practices in financial services. These include the following:

Mortgages with rates that are discounted for a limited time.
Credit card rates that are lower for balance transfers than for new purchases.
Bank accounts that offer high interest rates that are then lowered.
Accounts that can be opened easily but are more difficult to close.

I would look for language in a regulation or law that covers all these at once – a regulator should not be trying to catch up with the dodgy practices of the industry.

Sian says:
19 April 2012

Please put whatever pressure Which? can to speed up FCA protection for second charge borrowers. These consumers are badly exposed in a market that exploits the vulnerable by lending unaffordable loans which are secured against people’s homes. Extortionate charges for arrears mangement and litigation which attract compound interest soon make these debts spiral out of all control. These are deliberate tactics of lenders in this “homeowner loan” market. The OFT has regulated this area – they are unable to protect consumers adequately and cannot order redress. Thousands of borrowers are having their homes repossessed – repossessions in the second charge market are disproportionately high. I’ve heard nothing is likely to change until 2014 for these borrowers – this is too long, families are losing their homes, people are desperate. If these lenders were transparent – most people would not have taken on the loans. It is a toxic market which is not regulated appropriately. Urgent action is required.

Angie says:
3 May 2012

With all the forthcoming changes to the FSA happening, has anyone noticed a recent trend relating to RDR ( Retail Distribution Review). RDR probably means absolutely nothing to most consumers. Yet it should. Major changes are afoot and going to take place on 1/1/2013. Working in financial services I have noticed that Barclays bank has recently got rid of all their face to face financial advisors. HSBC last week made all of their financial advisors redundant. The result being that many ordinary consumers can no longer get affordable financial advice on a face to face basis. I fear many more Banks will follow suit as a result of a change in regulation. Working as a Financial Advisor, I have been studying to pass the new relevant qualifications required and am now Diploma Qualified.
I absolutely agree to the reasons why the FSA has instigated the changes, but I really feel that no one has considered the consequences for the average consumer. From 2013 the way financial advice is offered will change dramatically. Commission to Advisers will no longer be payable.Meaning that the ordinary consumer will have to pay for advice , much in the same way as paying for a Solicitor.
Whilst that ensures the customer knows exactly what they are paying for, it also means that Financial Institutions are seriously considering pulling out of the market place altogether. HSBC for example feel that this service is now only available to customer with an income of over £100,000 per annum. Where does that leave the ordinary consumer, who simply wants to make use of tax efficient investments e,g, stocks and shares ISA’s through their bank. Where does that leave the consumer who wants to talk to someone about what type of life cover or income protection plan is most suitable for their mortgage or to cover their salary? All of the consumers who want face to face advice and don’t want to use the computer on a do it yourself basis. I for one, can’t see how the FSA has contemplated the consequences to the ordinary consumer of having to pay for advice through their bank.
IFA’s have long charged for advice, yet a considerable number of their clients still chose to pay for their services through commission, because they don’t want to pay separately for the service
Banks offer a valuable service through their financial planning services, yet more and more Banks are pulling out of the market believing that the regulations imposed by the FSA and indeed the new costs imposed mean it is no longer financially viable to provide that service. So they simply pull out of the market . leaving ordinary customers in the lurch again.

3 May 2012

I totally disagree with the above comment. I always thought it was ridiculous that those incentivised sales staff in banks were called financial advisors. We have all seen how they pushed their own brand products on unsuspecting consumers pretending products were appropriate when actually there was mass mis-selling going on. How can an individual bank recommend the best product in the market for a consumer. The whole problem stems from rampant biased sales which were more often than not to consumers’ detriment. The idea that advice was free is misguided. Those products often had high charges and profit for the banks. Roll on transparent products which are highly regulated with informed consumers using independent advisers if necessary. If products are sold with plain and simple language the ordinary customer will be in a much better position than being cornered by bank staff who have pretended to work in the consumers’ interest. Responsible lending, appropriate products and severe penalties for mis-selling.