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

Female hold yes and no cards

We’ve invited Martin Wheatley, the CEO designate of the new Financial Conduct Authority (FCA), to share his insight on the soon to be financial watchdog. He’s asked for the FCA to be judged on its results.

We are in the process of finding out from you exactly how things can be improved with the new financial regulator.

At its recent consumer debate, Which? invited me to hear about the types of concerns people have – whether it is with their bank account, or when they are trying to get a mortgage or sort our an isa.

A couple of key themes kept coming up: you want a system that ensures banks, insurers and advisers work in your best interests and that the products you buy are right for your particular needs.

It is something we are very conscious of, and at the centre of all of this change is delivering a fair deal for you, the customer. For me this means three things.

Changing how banks treat you

Whilst a good number of companies put their customers at the heart of what they do, we need to get more firms putting you first. That means more banks, more advisers, more mortgage lenders realising that dealing well with customers and delivering a good service is ultimately good for business. This also involves being clear and fair with you.

I was pleasantly surprised to find out, via a straw poll at the Which? debate, that about half of the audience said they did indeed read all the information they received on a financial purchase – opening a new account or buying an insurance policy, for example.

I suspect this may not be the case for everyone and I am keen to improve the way products are designed, sold and explained to you.

Changing how we work

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 FCA will be focused on what your experiences are when opening a bank account, taking out a mortgage or making a complaint.

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.

FCA turns over new listening leaf

I will ensure this change, and events like this are an example of what we want to be doing more of in the future.

I came away from the event in no uncertain terms that issues such as bank charges, improved trust in the companies you use and too much small print on the contracts you sign should be high on the FCA’s list of priorities.

If you could put me in your shoes for the day what would you want me to take on board? We want to continue hearing your views.

The FCA wants to act sooner to fix problems and aims to ensure you get a fairer deal. But as I said, you will be the judge of that.

Which? Conversation provides guest spots to external contributors. This is from Martin Wheatley, the head of the new Financial Conduct Authority – all opinions expressed here are their own, and not that of Which?

Do you read the T&Cs that come with a financial purchase?

I scan read and hope for the best (56%, 91 Votes)

No, never, they’re too complicated (17%, 27 Votes)

I expect my bank to highlight any crucial bits (14%, 22 Votes)

Yes, I love a good read (14%, 22 Votes)

Total Voters: 163

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Comments
JANE DAVIES says:
10 August 2012

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.

Waldo Derbyshire says:
21 May 2014

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”!