FSA: Don't let us down again

By THIS IS MONEY
Updated:

 

The Financial Services Authority has come under attack twice in the space of a week for its approach to consumer protection.

This is one of the key tasks of the FSA, yet it appears to receive a far lower priority than its other remits, such as ensuring markets function properly.

It is clearly illustrated by the number of consumer scandals that it has failed to detect or crack down on early enough.

Both attacks come from the same source: the Financial Services Consumer Panel.

Last week it warned that reforms to improve the stability of industry must not be at the expense of consumers.

It told the FSA that it should become a more transparent regulator and should take a tougher stance on enforcement to ensure consumers who have been adversely affected by firms' behaviour gain compensation.

Now it says the FSA is also unrealistic in its approach to consumer responsibility. 'How can consumers be responsible for decisions about products, when it seems that often those selling them do not understand how they work?' it asks.

This point is reflected in two stories in this week's Money Mail.

Allegations made by former Barclays salesmen show how little they and senior personnel at the bank appeared to understand of the true nature of the Aviva Global Balanced Income Fund.

The literature provided by the bank to its staff emphasised its suitability for cautious and balanced investors, when in fact it was suitable only for adventurous investors willing to take considerable risks with their money.

If a bank the size of Barclays does not understand what it is selling, then how can the FSA expect consumers to understand and take responsibility for such purchases?

The consumer panel also makes the point that the complexity of many financial products and the difficulty of finding an acceptable way to describe 'risk' means most consumers are ill-equipped to judge how a product will perform in future and whether it meets their needs. To understand the consequences of this we need look no further than the mortgage endowment scandal.

In the latest episode we see investors who have saved into endowments for 24 years, and had consistently been told they were on target, suddenly being told that they have a shortfall of thousands of pounds. Endowments were supposed to provide smooth returns over a long period to avoid precisely this problem.

How on earth does the Pru or the FSA expect an investor, who has saved for 24 years and has one year until his endowment matures, to find £5,000 or £6,000? Encouraging consumer education to help people make more informed decisions is one thing. But to put even more responsibility on consumers when the industry continues to create ever more complex products is completely and utterly barmy. As the Financial Services Consumer Panel says: 'The regulator should focus its attention on the firms it authorises, not the consumers it is set up to protect.'

 

Energy providers aren't charities. They are cash-rich companies with well-remunerated boards of directors in an industry which is pretty well recession proof. So why on earth do we treat them as if they are needy cases and give them interest-free loans? Because the regulator allows them to get away with it, that's why.

Energy firms are allowed to charge less to those who pay by monthly direct debit than to those who pay by other methods. If a customer is prepared to pay exactly what they owe at the end of each quarter then they should not be punished because they choose not to provide free loans to fat companies.

And it's inexcusable that our regulators allow foreign-owned companies to treat their UK customers worse than they treat their homeland customers. This is why today we are calling for readers to rise up and demand their money back. Dig out your energy bill, phone the number on it and tell them you want your cash back and you want it now!

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