Hector Sants, chief executive of the outgoing Financial Services Authority (FSA) has told MPs the industry holds the "flawed" belief its responsibility to consumers ends with providing product information at the point of sale, a situation the new regulator will look to correct.
Sants told MPs at a Treasury Select Committee (TSC) evidence session on the new Financial Conduct Authority (FCA), that ensuring a fair split of responsibility between consumers and financial service providers will be “problematic” for the FSA's successor.
But the industry's current belief it that its responsibilities end with providing product information at the product sale, he said, which he branded "flawed".
All of the FSA's research suggested providing lots of information does not improve consumers' decisions, he said.
He told MPs many consumers lack the mathematical skill to understand the information.
John Mann, Labour MP for Bassetlaw, accused the industry of being too "opaque".
"Consumers see opaqueness when it comes to decisions made by financial institutions, so how can they take responsibility for their own decisions?" Mann said.
Sants admitted there is not yet a clear definition of where consumers' responsibilities end.
"Full consumer responsibility is going to be very problematic," he said.
"What we mean by consumer responsibility has not been teased out adequately. We need a consensus on this."
Sants said the collapse of Northern Rock is an example of where consumers cannot be held responsible for the risk taken, as they could not have known about the risks within Rock's business model.
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