Developing a simplified advice scheme "as fast as possible" and regulating product design are among five recommendations the Financial Services Consumer Panel (FSCP) says would improve consumer confidence in the industry.
FSCP chairman Adam Phillips was speaking at the Building Societies Association on 13 October.
1) Progress the development of simplified advice as fast as possible
It would provide a source of product distribution to the kind of people who are expected to use the Money Guidance service.
It will provide a route for people who have small amounts of money to save to get some advice and buy suitable products at a cost, which will ensure that the maximum amount of their money is directed into their savings.
2) We need to regulate product design to provide better products that can be described fairly simply, and which do what they say "on the tin"
We need products which are presented in a way which is simple and honest with prices that can be easily compared with other products of the same type.
We need ‘good' product innovation, rather than innovation that conceals cost or risk in the pursuit of providing an apparently better price or higher rate of return. We also need the widespread availability of competitively-priced products.
We must also create a way to produce products which are not generic or price-capped, some of which could be safely sold through a simplified advice process.
3) The Financial Services and Markets Act (FSMA) and the Consumer Credit Act need to be better aligned
One example of misalignment is the difference in the rules in relation to arrears and repossessions for first and second charge mortgages. Another is the withdrawal of the Banking Code and its relaunch as a Lending Code with separate Moneymadeclear documents for bank accounts and credit cards.
4) The FSA should take on the regulation of consumer credit for major authorised firms
The FSA supervises deposit taking conduct of business, but not unsecured lending conduct.
Unsecured credit is the responsibility of the OFT, which does not directly supervise firms. Complying with the rules under which credit is extended has a big impact on the risk of retail firms, so it is important for controlling systemic risk that the risks associated with the extension of all credit is supervised at the micro or individual firm level.
Finally, customers are more likely to be treated fairly if business conduct rules require firms to operate in a sustainable way and staff incentives do not encourage mis-selling.
5) The FSMA should be modified to require the FSA to pay "due regard to value for money" when considering consumer protection.
This would be a big step in encouraging all firms to treat their customers fairly, since they would be aware that activities which were essentially profitable because of a failure by the customer to be able to understand the costs involved would be discouraged by the regulator.
For Phillips' full speech, click here.
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