Will the new financial regulator succeed? You’ll be the judge

After close to 40 years with the local branch of High Street bank, in 2007 we were approached by them, when depositing money, to take their financial advice. We took this advice from someone in the bank who we had known personally and trusted for 20 years. Being inexperienced in such things we took this advice believing this person was acting in our best interests. We realised later we had been mis sold. Our complaint to the bank was dismissed out of hand. Our subsequent complaint to the Financial Ombudsman Service dragged on for years and we are currently being forced into accepting their recommendation, which from our point of view is unsatisfactory as it only dissolves part of our investment which, if properly advised, we would not have entered into. During the FOS process breaches of code by the bank were discovered. Their poor and inaccurate record keeping was exposed. Their inability to confirm the dates of meetings and their insistence on dates of meetings, which we proved were wrong, were all ignored. The contradictory information provided by the bank, information sent to us after we undertook to enter into the investment, which should have been sent before we did so, have all been considered not relevant by the FOS although they themselves uncovered some of this information. None of these circumstances were taken into account and the FOS just seemed to focus on the risk element of the investments, not on the banks inaccurate record keeping and late provision of information. The FOS seemed to think these errors of fact not important. The Bank has got away with poor advice which was not in our best interests but seemingly for the benefit of the bank and their employees. We believe they were motivated by generation of their own fees. We have felt that it has been an uphill battle and the FOS have been tardy and have been, seemingly, biased towards the bank by refusing our request to pursue the anomalies; we have felt despondent and close to giving up. The new proposals regarding FCA, hopefully, will be an improvement on what we have now, particularly if it extends to the way banks offer and administer investment advice to inexperienced and vulnerable customers.

Some questions if you please Martin.
– In light of the FSA admitting in their report into the £45 Billion bailout of RBS, that “risk based assessment (ie, the Hampton principles)” were “flawed” and completely failed to regulate – will the FCA be using these same Hampton principles and risk based assessments to regulate?
If the FCA will continue to be governed by these same flawed principles of regulation, then how on earth do you propose the FCA to be any different from the toothless FSA?
The “needs of the business” gets far too much consideration and ties regulator’s hands. The needs of the consumer MUST be put first, that is what we are paying record amounts of taxes for!

– Will the FCA now be working with the OFT in bringing a legal case against banks for their charges?
Unenforceable charges under common law in England and Wales, as no bank charge has been presented before a court with an accurate breakdown of actual cost incurred, I fail to see how the regulators and enforcement bodies can justify complete non action, whilst at the same time telling the public they are standing up for them.
The FCA should stop leaving it to the individual and act.

– “we need to get more firms putting you first” – please stop with the spin.
If businesses were not shaping regulation, for their own benefit, we would not be paying with the cuts we are facing today and for the forseeable future.
Regulators across the board exist to protect consumers, not “advise businesses how to comply with the law”

– “The FCA is being set up with new powers to protect your finances. We will be tougher and more willing to act when we think you may not be being treated fairly”
The key term there is “when WE think you may not be being treated fairly”
As we have experienced with the FSA and FOS, what they think is fair doesn’t tally in anyway with what’s happening in the real world.
If you are working within the same rules on regulation, then you will be bound by the same hampton principles that state you have to consider whether or not any action you propose wll be detrimental to businesses, if it is, you cannot legally enforce it.
Will you have any requirements for deeming something is unfair?
Will you take notice of individual complaints or will, as we do now, have to see thousands of identical complaints before you will even look at the issue?

– “We will be out testing what’s happening on the ground, both at the point at which you deal with your bank or building society but also when products are being designed. Going forward, if problems arise we want to stop them before they harm you”

What you don’t say there is that under the hampton principles no regulator or enforcement body is permitted to inspect without good reason.
As is the case now, generating a “good reason to inspect” is damned near impossible with a business that has a “compliant status” with the FSA, which is the majority of businesses.

I echo what “disappointed” has posted.
The FOS are incompetant at best, they are unanswerable, not in anyway transparent and self believing that they are above the law.
To quote an example of my experience of taking a case to them;
Mis-sold PPI by a company that “works alongside and audits on behalf of the FSA”
FOS agreed and stated in writing that the consumer was misled at the point of sale.
FOS then ruled in favour of the business because it was “not convinced the customer would not have bought the policy, had they been accurately informed at the point of sale”

Of course this was a complete fudge – had they ruled against a recognised FSA policy training company it would have adversely effected the “needs of the business” and it would not have been able to enforce its ruling. It confirmed that this was considered as it stated in it’s final ruling that “regulation must be considered alongside the facts of the case presented”
So much for fact based complaints which the FOS dragged on for almost 3 years!

I don’t hold out much hope for any new regulator or enforcement body to do anything to help real people.
Business has too much influence (writing training modules for some enforcement bodies!) – any action has business needs considered first regardless of consumer complaint (hampton principles) – the same people are employed at regulators (are the FCA and FSA not the same staff?)

Until the way regulators work is changed and the farce of risk based assessment (hampton principles) is removed, things will go on as they have been in recent years.
Those running regulators will remain out of touch when it comes to helping the majority of the public.
How many people that actually pay bank charges or have been mis sold a PPI policy will work on the board of the FCA? Not many I bet….

My question is of a more simple nature; How many times do financial services have to be caught with their hands in the till before any regulator actually takes meaningful action? I refer to pensions mis-selling, ppi mis-selling, endowment mis-selling, investment mis-selling et all.

The recent episode of politicians being too close to some in the newspaper industry is echoed in financial services. Too much “you scratch my back and I’ll look the other way” going on. So come Martin, lets see what you’re made off.

Will the FCA be overseeing 2nd charge mortgages? The current system of 1st charge loans being with the FSA and 2nd charge with the OFT is a cause of great detriment to 2nd charge borrowers. The OFT cannot order redress when consumers have been unfairly treated. Consumers in this market continue to be treated poorly.

I visited my bank branch on 2nd march, and agreed a fixed rate bond. When the certificate arrived, it showed that the bond wd not come into effect untill 19th march??? Losing 2 weeks interest. Is this correct?

Another bureaucratic nightmare!

I must say that, although not having much money is not a good thing, at least it means that you are not bothered by crooks called ‘financial consultants’ or ‘investment managers’, all of whom are just trying to take it off you. If I had any money, I would buy myself a nice house, somewhere warm, and keep whatever money I had in a safe somewhere. The stories I read about how banks treat their long-standing customers are almost unbelieveable. How can the man-in-the-street know who he can trust? The story in the paper today about Goldman Sachs says it all!

Two comments:

Firstly, surely all that is needed is for there to be greater adherence to, and enforcement of, the FSA’s existing “Treating Customers Fairly” requirements.

Secondly, the comments re FOS are somewhat unfair. In the days when complaints were fewer and FOS was staffed by experienced professionals, complaints were considered on their individual merits. The problems have arisen because of the overwhelming volume of complaints in recent years, starting with those relating to mortgage endowments, and the consequent need to draft in less experienced people and the application of a formulaic approach to complaints.

The so called “independent” FOS is overwhelmingly staffed by ex- finance industry people – look at the Ombudsmen’s backgrounds. We need more consumer champions there: Which?, CAB, NationalDebtline people not those trained in the evil ways of the banks, dodgy lenders and debt collectors. Richard is right it started with endowments, then there was Equitable Life, then there was PPI, unfair charges, irresponsible lending, poor treatment of vulnerable customers, etc etc. These crooks need policing rigidly, not “requirements”. Roll on the FCA, the tougher the better.

So far as savings are concerned, the FCA urgently needs regulations to ensure that each bank gives the same set of interest rates to *all* its savers, no matter whether their account has been open a day, a month, a year or 30 years.

It should start by absolutely banning all promotional rates, which are nothing more than a bogus way of advertising interest rates that most customers of that bank will not receive at all, and nobody will receive permanently. Instead, the banks should be forced to have standard account types (limited to no notice, 30 days and 90 days) advertising a single interest rate for each notice period no matter how long they have been held or whether it is closed or current.

It is possibly acceptable that banks can pay higher rates of interest for genuine factors that reduce costs, such as internet-only accounts and having higher balances, but it is completely unacceptable that banks are allowed to advertise misleading and unsubstainable rates that existing customers do not automatically receive too.

Dear Mr Martin Wheatley,
Please could your staff regularly test banks compliants proceedures are actually working and that mistakes are learnt from and feedback in to the banks system to improve it so the same mistake doesn’t keep happening to other customers.

I had a recent experience where I took out a mortgage with one of the biggest building societies in the country and they made a number of mistakes in setting it up for example to give me £155,000.00 without checking the buildings insurance was set-up with their own insurance department. I found out three weeks after I’d moved in my house it was not insured, in year 2012 basic mistakes shouldn’t still be happening, I reported it to them which meant phoning a call centre and they gave me £20 as an apology but no attempt was made to contact the branch to understand how it happened and learn from it so it doesn’t happen again by improving procedures.
Thank you,
Alex

In my opinion, until we as customers force the banks to treat us better by leaving them. or not using their products if we think them unfair, nothing will change. As discussed by some of the customers above, all the industry including the regulator’s office is staffed by ex bank people and financiers who basically want to maintain the status quo so that they can keep on fleecing the customers who allow them to. Until we as customers vote with our feet, nothing will ever change.

hi, I really hope something can be done about PDL’S and their underhand tactics, IE putting money into your account without your knowledge and then asking for twice and sometimes three times back the amount they have deposited ,the APR, INTEREST and Charges are disgusting,time to stop these PAY DAY LOANS they prey on the vunerable .

Hello again Mr Martin Wheatley, new topic this time mortgages, I’m looking for a new mortgage and am finding it incredibly difficult to compare mortgages between different providers because of the way banks and building societies are presenting the figures to customers with extra charges like Booking Fee, Completion Fee, Arrangement Fee, Exit Fee, Redemption Charge, Interest Reverting To, etc. which can run in to thousands of pounds. I know I’m not alone because the comparison websites struggle to get the figures right to. The lenders have followed the same route that utilities companies and airline companies with overwhelming the customer with different figures and extra charges and as we know there have been lots of complaints about it so regulatory bodies are being asked to take action like Ofgem. The mortgage “Key Facts” document is a great help in trying to understand the overall cost product but does need updating because to get the document you have to spend 30-60 minutes with the financial organisation before they will issue one so it makes it very difficult to compare across most financial organisations quickly to see who is competitive and who isn’t. My point is if I want to borrow £100,000 for a mortgage, quite a common request, I should be able to see briefly what it will cost me for most for lenders without having to go in. So my suggestions are:

1/ The Key Facts document is updated to expand the “Overall Cost Of This Product” to include a new figure “Overall Cost Of This Product For 3 Years” so as you probably have guessed this would be the figure if I held the mortgage just for three years and it includes ALL the extra charges that I mentioned earlier like Booking Fees, Completion Fees, Redemption Charge, etc. Three to five years is a good time for customers to review their mortgage account and check the market again to see if they are still getting a fair deal and to consider if they should switch to another lender or product. It is also a fair time for lenders.

2/ When lenders market their products on web sites, literature, in branch windows customers need an easier and quicker way of seeing whether it is a good offer or not as displaying the APR is no longer any good on its own and its meaning is confusing to customers so I suggest a standard set of illustrations must be supplied as laid down by you and your team. So a good example would be the “Overall Cost Of This Product” figure displayed from the Key Facts document based on a standard amounts like £100,000 borrowed for 25 years. I do like that Overall Cost Of This Product..! So you can probably guess my next favorite figure, it is the one I suggested in point one, “Overall Cost Of This Product For 3 Years” based on £100,000 borrowed for 25 years, and is also displayed with all lenders marketing material. Of course these are just my examples but anything we can use to bench mark lenders products is better than nothing.

Thank you for your time,
Alex

How many personnel are going to be in the FCA? I fear that it has a huge task ahead of it and not enough manpower or hours in the day to do it. I welcome the arrival of a regulatory body with more “teeth” but I hope that it can cope. From the above comments (and my own experiences) the customer is certainly not king. (Sadly, I know that this is not confined to the banking industry.) I have had to endure the hard sell in two (separatey owned) banks when I enquired about savings products recently. Both banks tried very hard to sell me investment products which I had told them in advance that I did not want. This is the tip of the iceberg. I won’t even begin to tell you about the problems I have had with one bank recently regarding an insurance policy. Letters going into “black holes”; faulty paperwork; illiterate paperwork. Need I go on …?!

Worth noting by which? and the public at large;

LIBOR – Barclays remain “compliant” with the financial services authority despite it’s admissions.
The FSA failed to pick up on this because under Hampton principles – no inspection can take place without good reason (also a major factor in the case of RBS) – regulators of USA were investigating, not our own regulator.
Only when other country’s regulators highlighted and started moves in the courts to fine Barclays did the FSA start to act.
The FSA are not subject to the freedom of information act, so the public have no way of finding out exactly how many people/companies reported it to them before regulators abroad made it impossible for the FSA to ignore.
Many have called for Barclays to be prosecuted and questioned why an admission of misleading on LIBOR has resulted in no prosecutions – this is simple to answer, the Hampton principles and 2008 regulations put on the statute book because of it prevent this.

Barclays trading license can be removed under legislation, if the FSA so wish, but because of the Hampton principles, this would be “detrimental to the needs of the business” so cannot be enforced. Barclays would appeal through the courts, undoubtedly win it’s case and cost the taxpayer millions).
As Barclay’s consumer credit licenses cannot be taken away, all the FSA can do is “speak to” and “work with” them.
With their licenses remaining they continue to be deemed “compliant” with the regulator (FSA).

In practice, this blocks a criminal case from being taken out, keeping it in the civil area of action and enforcement.
http://en.wikipedia.org/wiki/Regulatory_Enforcement_and_Sanctions_Act_2008
(see summary of parts 3 & 4 of the act – which came into law in 2008 as a direct result of the Hampton report published in March 2005, being adopted across the board, in all areas of regulation)

The same regulatory code applied to RBS, when they overstretched and tried to become one of the biggest banks in the world, too far too fast and got their fingers burnt.
This single failing cost the British taxpayer £45 BILLION (almost the entire armed forces budget per year) and leaves the taxpayer today sitting on (according to government estimates) a £25 BILLION loss that will never be recovered.

The all new FCA will be governed by the exact same legislation, so how they propose to “stop things happening before they happen” ie, prevention, is still unanswered.
Under the act linked to above, the “compliant” business are still exempt from inspections without good reason, only have to provide limited information when required to and this information is produced by the business concerned, not as a result of the regulator/enforcement body turning up and going through the business’ computers/records, etc.

The most daunting thing for me about the Hampton principles, is that much of what was available online regarding this, is slowly being edited away.
Websites that formerly posted about it are now replacing the facts with “summaries” or removing the information altogether.
MPs will not even mention it, regulators are ignoring basic questions on it, select committees in parliament do not point to it, yet to even the most casual observer, it is glaringly obvious that it is the root of problems across the board.

The FSA, the new FCA, trading standards, OFGEM, OFCOM, all ombudsmen services, OFT, etc, are all forced to work under the Hampton principles and continue to do so.
“Compliant” regulation, does not work.
Businesses cannot be trusted, because businesses were the ones consulted (under the spin of being called “stakeholders”) and shaped the Hampton report in March 2005.
Have a quick read through the Hampton report summary available online, it’s an eye opener and reveals exactly why Britain is in the mess it’s in today.

If this regulation failed on such a huge scale with the banks, then why does this same (lack of) regulation continue to be applied to car insurance, supermarkets, all other areas of big business, etc?
Rip off Britain is commonplace, until a conviction politician gets into power and removes Hampton principles and advisary regulation, it will continue to happen.

About 3,000 people from the FSA, including virtually all the support functions, will go to the FCA, which will supervise markets, smaller brokers and advisers and will watch how financial institutions of all sizes treat their customers. It is expected to remain in Canary Wharf. The FCA will carry on two of the FSA’s biggest projects: the retail distribution review, which focuses on investment products and advice for retail customers, and the mortgage market review

Add to this that Martin has now been asked to run an investigation by the Chancellor, will the FCA actually be led from the front, or simply carry on the failings of the FSA but under a different name?

What kind of retraining are these ex-FSA people getting? They need to change their mindset from pro industry to pro consumer first and foremost. Any business that puts consumer detriment over and above personal gain is not fit for purpose. You cannot leave any wriggle room for finance companies and you must be able to move quickly when loop holes are found. The FOS has to stop using the Banks’ own Banking Code to judge banks’ behaviour. The FCA has to police consumer complaints.

Ombudsman service ref 1006-4902

Mr H was in his forties and working long hours for less than minimum wage as a chef. In 2000 he contacted the bank where he had his current account to cancel his direct debit contributions to savings plan, but the bank refused and his account became overdrawn, so the branch staff provided him a loan of £2700 at a cost over four years of £4670!

After the bank had provided this loan he soon became overdrawn again and unable to maintain repayments, this loan was refinanced with a greater loan of £3000 at a cost of £5550 over five years.
When again after three months, he was unable to maintain repayments, this loan was refinanced with a greater loan of £4500 at a cost of £7743 over five years.
When after five months he was again unable to maintain payments, this loan was refinanced with a yet greater loan of £6400 at a cost of £10750 over five years.
When again after 10 repayments he was now unable to maintain repayments of now £179 per month, this loan was refinanced with a yet greater loan of £9600 at a cost of £15590 over five years with repayments now an eye watering amount if £260 per month!
When again after 9 repayments he was again overdrawn and unable to maintain payments, and was threatened with legal action by the bank!
So each new loan consolidated the previous one.

By March 2004, Mr H found himself with a debt that he had no realistic means of repaying. He complained to the bank, but could see no way forward with a debt so large. He felt the bank should have considered his ability to repay before lending him such a large sums, and said the bank was responsible for his present predicament.
In order to avoid legal action, was forced to take out a second mortgage of over £20000 via his mortgage provider to repay the credit charges and credit card account he had also used in trying to meet repayments!

First appearances suggested that Mr H was not earning enough to support the borrowing. From the difficulties in meeting the repayments it appears that all the loans were actually unaffordable! This is confirmed by looking at the current account which showed that the repayments were continually creating an overdraft on Mr H current account.

Each time he became overdrawn, the branch bank staff coerced him to take out a greater loan to clear the overdraft and repay the old loan. He had been sold payment protection insurance with each new loan. This made the situation worse, as the premium added a significant lump sum to the accumulated debt. This pattern of borrowing meant that Mr H had ended up with a extremely large loan and could not reasonably afford the repayments.

It should have been clear to the bank that Mr H was having difficulty affording the loan repayments, since it also held his current account, and took this into account when investigating Mr H situation.

Complaint rejected:
The FOS somehow stated that this was “fair and reasonable” and “the bank should do nothing”!