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Justin Tomlinson: Why I was first to adopt the Which? watchdog

Milo, the Which? watchdog, is the face of our campaign for a strong, open and proactive financial regulator. In this guest post, Justin Tomlinson explains why he was the first MP to adopt Milo and what he represents.

One of the key lessons to come from the financial crisis is that consumer interests have been woefully under protected. Whether it be the mis-selling of PPI or hidden banking charges; for too long the financial sector has been able to hide behind a web of complex terms and abstract figures.

People have been forced to make decisions based on, at worst inaccurate, and at best confusing, information. The Financial Services Authority (FSA) failed to get to grips with the vast regulatory challenge placed before it and ultimately, consumers have suffered.

What the Financial Services Bill means for consumers

The Financial Services Bill that is currently being considered in parliament will completely change the way our financial sector is regulated, abolishing the FSA and replacing it with a number of more narrowly focused regulators.

Crucially, it will establish a ‘conduct of business’ regulator known as the Financial Conduct Authority (FCA) to make sure that business across financial services is conducted in a way that ‘advances the interests of all users and participants’. In short, it will establish a watchdog that stands up for the interests of consumers.

The challenge now is to make sure that the FCA has the teeth to deliver. I’ve been an active voice in parliament on consumer issues campaigning for greater transparency around financial products and I fundamentally believe that any regulator must put transparency at its heart. How the FCA achieves this goal is open to debate, but it must not fail. Without transparency, consumers cannot make informed decisions.

Why I adopted Milo

The excellent Which? Watchdog not Lapdog campaign pushes for the FCA to be: strong – standing up to banks and promoting competition; open – naming and shaming the firms that break the rules; and proactive – acting on issues before they become problems.

And I agree. The key to making the industry transparent is promoting clear and concise information about the products and services available. This should include things like displaying costs as cash values and standardising the terms used in advertising so that products are easy to compare and switch between.

But giving people the information to make informed decisions is simply not enough. We also have to make sure that consumers have the skills to make those decisions. Last year I led an All Party Parliamentary Group – the largest in parliament – in a campaign to see Financial Education made a compulsory part of the national curriculum.

With these key skills and a transparent financial industry delivered by the FCA, consumers will be empowered to make informed, savvy financial decisions. We can finally make sure that the consumer comes out on top.

Which? Conversation provides guest spots to external contributors. This is from Justin Tomlinson, MP for North Swindon – all opinions expressed here are their own, not necessarily those of Which?

Paul Rouse says:
17 May 2012

Other than Fred the Shred, no one has been brought to account for the last debacle. Not the Banks whos executives trousered massive sums on the back of 120% mortgages and sub-prime instruments that no-one could understand, or the politicians who swopped light regulation for tax income, or the Bank of England who were told by people like me and dear old Vince Cable that it would all end in tears. The best way to regulate something as important as this is to ensure that it does not happen again by making an example of someone, and by that I do not mean removing a Knighthood, or giving them a £multi-million pension.
Currently, Im ashamed to admit to being a Freeman of the City of London, and will continue to be until we re-introduce ethics and integrity into our financial institutions.

Chris Hargreaves says:
17 May 2012

The problem with the FSA is it only acts when it is to late. Many people within the industry for example thought KeyData was flawed from the start but unless the adviser was switched on this product was sold as 100% safe in certain situations. Take the big debate at the moment about protection policies being based on general “work tasks” (hold a pen, lift 1kg, speak or hear) as a way of determing if you are able to carry out your job. The industry has known about these flawed policies for years and furthermore The Brazilian Govt banned them in 2006 because they failed to pay out and they were unindated with complaints.
The big problem is IFA’s who refuse to sell a flawed product end up having to stump up the cash into rescue funds even though they never sold that product. I know of companies who have had demands for up to a million pounds to paid in full within a short period. Maybe all products need to be assessed by independant experts and these findings made freely available to the public. So in the event a broker says this product is awesome and 100% risk free you can visit a site which says actually there is risk and x% of experts feel this product is not suited for xxx reason.