We use cookies to allow us and selected partners to improve your experience and our advertising. By continuing to browse you consent to our use of cookies. You can understand more and change your cookies preferences here.

FSA must tackle problems at heart of the industry

Which? calls for overhaul of product regulation

FSA logo

As the FSA publishes a discussion paper into product regulation, Which? is calling for a major overhaul of product regulation.

Which? chief executive, Peter Vicary-Smith, says: ‘We’re pleased to see Lord Turner recognise that the FSA’s ‘hands off’ approach to product regulation needs a serious overhaul. Which? has been campaigning for years for the FSA to tackle the problems at the heart of the industry – that many are fundamentally useless or, even worse, toxic to consumers.

‘If left to its own devices, the industry will spend its energy inventing products and sales practices that fill the balance sheets but don’t deliver for their customers. From pension and endowment mis-selling to PPI and most recently the emergence of identity theft insurance, this hall of shame is evidence enough that a new approach is long overdue.’

The actions Which? wants the CPMA to take

Which? believes that the Consumer Protection and Markets Agency (CPMA) should embrace the role that product regulation can play in addressing conflicts of interest, disciplining markets and aligning the interests of producers with consumers. Product regulation could be used by the regulator to address three key issues:

  • Ensure minimum standards for key products: There are certain products, such as current accounts and protection products that consumers need access to. We believe the regulator should ensure that any such products meet minimum standards. We would draw a parallel with motor insurance where all products on sale must meet minimum legal requirements, and consumers then have the option to add on additional ‘bells and whistles’. A further example would be to set the default standards for some products in the interests of consumers – this could include ensuring that consumers are able to opt-out of unauthorised overdrafts for current accounts. The regulator may also take steps to ensure that information disclosure is on standard terms, enabling consumers to easily compare products. It could take steps to introduce industry-wide standards such as portable bank account numbers for current accounts.
  • Minimise the toxic aspects of products and in some cases prohibiting a particular type of product or specific product (for example single premium Payment Protection Insurance): Product regulation can play a valuable role in limiting the harm that certain products can cause.
  • Ensure the availability of ‘vanilla’ products: Experience has shown that the financial services industry alone will not develop simple, good value for money products which meets consumers’ needs. We believe the regulator should pursue the idea that providers and intermediaries should offer simple, straightforwardly priced ‘vanilla’ products alongside their additional product offerings. This could be used alongside rules similar to the current ‘RU64’ in the pensions area which requires firms to consider whether a simple good-value stakeholder pension would be more suitable than any more complex, higher charging pension product which they are seeking to recommend.
pound coins

Which? Money when you need it

You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.

Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.

Or for money-saving tips, and news of how what’s going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast

For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.

Back to top
Back to top