/ Money

We quiz the FSA about the future of financial regulation

The City

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?


We currently have european laws, european rules, FSA rules, etc, etc, all with differing levels of control and power, but none that reflect the actual laws of the UK.

Bank charges – to a degree, I can understand why banks continue to impose them.
The rules contradict legal precedent.
The current FSA “rules” state that a bank must state the level of charges in contracts etc, also, banks must inform the other party if those charges change significantly.
Legal precedent however, is different.
If a party (in this case a bank) cannot provide proof that the charge being issued is recovering “actual loss” then the charge is deemed to be unenforceable.

All of which has left the customer unprotected.
It is no coincidence that millions of pounds have been refunded when customers brought their claims for refunds before the small claims court. I find it completely bizarre that when I ask the regulator directly, what they are doing to uphold common law on this issue, the only response I get back, is a summary of their own rules and nothing about what is being done to enforce the law.

To change our laws would require consultation and then voting in parliament, where it will be debated. Those that vote in laws that fail the individual can then be held accountable at the ballot box.
Instead we have the complete mishmash of a regulator making rules that are a watered down version of legal precedent.
Can we really blame banks that apply FSA rules instead of the law?

Regulators in all areas are there for the benefit of the individual. They are not inplace to “work with” and “recognise business needs/training issues” – they are a protection system for individuals. People view them as working alongside the laws of the land, in reality, they enforce their own rules which are often different (or a watered down version of) the law.
Regulators need to get a backbone with businesses in their field.
Too many regulators are duplicating each other’s work, I’d like to see;

– regulators using the law and legal precedent as their “rules”
– given real teeth to punish/close businesses (creating a deterrant for others thinking of operating in the same way) no matter how big the business is
– be accountable directly to the public
– an end to “super complaints” whereby only pressure groups and official bodies can register a complaint
– single regulators for an industry, complain today about a product or service failing, do you goto consumer direct, consumer focus, trading standards, etc?
– tackle blatent profiteering by businesses, ie, insurances.

Emm says:
30 June 2011

frugal ways is hitting many nails on the head – if only they were bankers!

As a capitalist state, red in tooth and claw, England gives every chance to large businesses especially to get away with whatever predatory activities they can think of. Banks are an extra special case, where the taxpayers’ money is brazenly taken from them and given to the very people who collectively brought the wester economies crashing down.

So anyone going head-to-head with financial companies has a huge task ahead of them.

Nevertheless, it is possible to mitigate at least some of their predatory behaviour, but it does involve the use of the law – which is very expensive, and unpredictable. In this area consumers need the power of an organisation – like Which? – to take the miscreants to court. It may be that there are rules to stop it, but I am very disappointed with Which?’s genteel approach to the banks, who only respect a hefty legal kick to the head – which should be a personal one, namely to the board of directors.

Of course, most of the blame for letting the banks get away with criminal behaviour lies with the politicians, who actually formulate and pass the legislation; and the OFT, which behaved with sublime stupidity when taking the banks to court over ‘fairness’ of bank charges. The courts are not concerned with ‘fairness’ in contracts – how do you define ‘fairness’ for a start – but they are concerned with existing laws, such as the UTCCR 1999, which quite explicitly give several reasons for the illegality of bank charges as they were and still are.

The OFT says that it has the power to shut down operations which significantly and persistently flout the law: and who has done that more than banks? Why haven’t they had their Consumer Credit licenses revoked, or suspended for a while, as the OFT threatens to do to law-breakers? Probably because the banks are protected by our corrupt and useless politicians. But at least the OFT should try and flex their muscles, and see how far they get.

Nowadays, the consumer in fleeced from every corner – from hospital parking charges and often subsequent penalties, to banks, DVLA, insurance companies, energy companies, etc., etc.

Our personal details are open to the banks, their subcontractors and their employees, the government, police, etc. – none of whom are famed for their ability to protect our privacy.

Since the political system has failed to do what it is actually there for, namely to protect its citizens – sorry, ‘subjects’ – we must organise and defend our rights as best we can through organisations like Which?, and similar; and also, as far as possible, as individuals.

Good luck to us.

Emm – As part of the reforms to financial services regulation there are plans to give consumer organisations such as Which? the power to report products they believe are being mis-sold or are ‘toxic’. The powers would work much like ‘super complaints’ that can be submitted to the Office of Fair Trading but would cover financial products. We think this is a fantastic proposal and would give organisations like Which? the power to tackle problems earlier so that people can get the speedy and fair redress they deserve.

Loopy loo says:
29 June 2011

I think the biggest problem is that the consumer is not given a transcript of any phone agreements. The legal expenses insurance business should be regulated, as it is out of control. Both car insurance and legal insurance wacks up the cost of legal action and cases artificially, by charging vast legal costs to the insurance broker, who then expects the “LOSING” SIDE to pay for all the costs. If You lose you are then given a very large bill for all the time wasting argument and vexatious attitude that the solicitors of the other side made up. Why not set a stipend of expenditure on insurance backed legal proceedings to enable those of us facing the GOLIATH MUNNYMAYKING INDUSTREE AND no David in sight to help us. The FCA could stop these monstrous boundary disputes cases getting out of hand becaue the insurance company says they are “seeking to resolve the dispute quickly” but really they are trying to elongate the issues into a court case and lots of legal costs.

They also have no protection for first time buyers because if a dispute is begun by on a new owner then they cannot see the insurance claims of the previous owners who they bought from, and if they did they might see that there has already been several boundary disputes “resolved” simply because they could not fight a battle in court over a 2 inches of fences that would cost £thousands…

1 One of the FSA’s functions is the registration of mutual organisations.

2 More of these will be created by community associations performing former council functions under the ‘Big Society’ and it is important that local consumers have access to information showing how well they are using public assets transferred to them.

3 While an organisation’s accounts and filed papers are available fom the relevant registration authorities free and online from the Charities Commission if it is registered as a charity and for a nominal sum if it is a company regisitered at Companies’ House, the same information about mutals costs a minimum of £50 from the FSA and is not availablke instantly.

4 The government should require all regulators holding public information on bodies where the public has an interest to make this available online and at no more than nominal cost

Banks and Hedge Funds have been putting large amounts of money into the commodity markets. In the USA the Quantative Easing (printing e-money) has been used in that way. This is causing a bubble in the market where a bubble should not be. Can we prevent UK banks and hedge funds from distorting these markets? And work with the EEC and the US to control their domains?

Also Banks and Hedge Funds are legally avoiding UK Tax by using UK controlled tax havens. Jersey, Guernsey, Isle of Man, Gibralter, Turks and Cacos Island, British Virgin Islands and possibly other EEC controlled place such as Luxembourg and Lichtenstein. Although these places have hopme poicy rights there tax (race to the bottom) should be stopped as it has extra territorial impacts. This is removing from the UK income huge amounts. The Cuts proposed by the coalition whould be much less if these tax havens were closed. This might be too difficult, so perhaps we make UK registered companies state in their filed accounts how they use Tax Havens and the amounts of tax avoided. This would then enable UK Tax Authorities to see the amounts and check the arrangements are correct and also allow public discussion of the scale of the avoidance taking place. There is a case to say that the Corporation of London is now more influential than the EEC or the UK Government. This does not seem right.

It’s about time the FSA looked at the interest rates charged by credit card companies when the Bank of England rates are so low. Many of them are charging up to 30% per annum.

We should have a usuary law that prevents interest rates at more than say 20% without court approval. Banks should have a right to charge higher but will need court approval and state there reasons why. That way high risk cases could be charged at higher rates. Blcok approval might be possible around criteria approved by the court./

very frank says:
4 July 2011

I think it should be a lot tougher to get credit, borrow and over-draw. It’s far too easy to run up a credit card balance as the money does not debit from the account and the profits from the irresponsible are a lure for both shareholders and lenders alike. Greed and performance selling have corrupted what was once a responsible industry. I recall as a student being denied a credit card because I did not have any income (apart from a paltry grant). Nowadays someone without a job can apply and receive £3000 credit limit guaranteed credit card on the basis that their spouse has an income but without any checks to ensure that this is affordable. We know because my wife and I carried out a little experiment just to see what a “stay at home Mum” could conceivably borrow. Horrifying we think, and when we are trying to teach our children how to be responsible with small amounts of money, what a hypocracy ! Come on lenders: this is hardly responsible lending, and such practises should be immediately curtailed if the industry is to regain any credibility and respect. The French do not over-lend nor do they allow anyone to overdraw on their current accounts. Yes there is a message here.

Emm says:
8 July 2011

Thanks for your comments. However, useful as these new measures might be, there will always be an element of playing ‘catch up’ with the banks’ ‘creativity’.
What I’m more concerned about is that, years after the issue was first raised, we still haven’t put bank charges to bed. People are still being ripped off at £39.00 per ‘charge’, whilst credit card defaults attract ‘only’ £12.00 a go. Why? What is Which? doing about it? Or the OFT, who brought a deeply flawed court action against the banks, and then retired hurt?
The banksters on the other hand, are tirelessly still at it, e.g. Egg wrote to me to say that their interest rates are going up to 19.9% in September, despite the base rate being at 0.5%; etc.

We need to face their predatory activities and eliminate them as they arise, and not just leave them in limbo, so they can continue with their nefarious activities. Sort out the bank charges; suspend their Consumer Credit licenses; make directors personally liable – in other words, hit them where it really hurts. If the OFT had anything about them, they would have handed out a CCL suspennsion or two – and then watch how the miscreant’s competitive position is eroded, with the concommitant squeeze on the board of directors to get their act right.

The unfolding Murdoch saga is a case in point – challenge these bullies with will and conviction, and they’ll yield. Of course, as well as will and conviction, we need eternal vigilance.

Probably too much to ask for?!

Bring back the decent Branch Managers who knew their patch & had discretion they should direct call centres with flexibility and ethics allowing issues to be raised and resolved. When are they going to realise their security procedures are stopping money going in or coming out as many including the elderly & disabled cannot remember long strings of numbers .