The Conservative Party says it would overhaul the way in which the Financial Services Authority (FSA) and Financial Ombudsman Service (FOS) operate if elected into government.
In a report entitled Reform of regulations covering the UK financial services industry the Conservatives claim: “The FSA has allowed a culture of regulatory self-protection to develop to the detriment of the UK financial services industry. The FSA over-regulates as it aims to protect itself from possible failures and complaints. Industry seeks to over protect itself against an active regulator that operates through fining and publicly shaming institutions.”
The report proposes the current public FOS appeals process be scrapped in favour of a private appeals process, claiming the current system is virtually unusable owing to issues of reputation.
In addition, the Tories say consumers should have to pay a refundable fee in order to make a complaint to the ombudsman in an effort to deter what it calls "frivolous claims" against IFAs or financial institutions. This follows a 57% rise in the number of complaints made to the FOS in 2003/2004 by consumers who feel they were mis-sold an endowment mortgage.
The present system allows consumers to make a complaint for free, but the Conservatives say it costs the average IFA around £500 to challenge a complaint made against them, but only £360 in admin fees to simply pay the fine imposed by the FOS.
The Conservatives have also called for the introduction of an independent board of directors for both the FSA and FOS, and a review of how the FSA’s new remit is being implemented after six months, to ensure staff numbers are being reduced and a new culture focusing more on competitiveness has been established.
Mortgage regulation will also be investigated to ensure it is not “unduly burdensome”.
The Tories want scrutiny of the FSA to be transferred from the Treasury Select Committee to the Regulatory Reform Committee. And they have called for the FSA to provide a more comprehensive cost benefit analysis of each new regulation it introduces.
The Conservatives have also committed themselves to opposing any moves to create a single EU financial regulator. The Party says the FSA should not implement new directives regarding the financial services from the EU without first being assured other member states are at least “well on the way” to implementing such regulations as well.
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