Financial Services and Markets Appendices to the Minutes of Evidence


APPENDIX 54

Memorandum by the National Consumer Council

  Having read the transcript of the evidence given to the Joint Committee on Financial Services and Markets. I thought it would be helpful if I summarised the points we wish to make.

  The consumer protection objective should be expanded to make clear that consumers are entitled to buy products of satisfactory quality. This would exclude investment performance.

  We were not asked our views on the role of the Authority in promoting access to financial services, although this was contained in our response to the Treasury's consultation. As an alternative to what was suggested there, it would be possible to give firms a duty to offer reasonable access to financial services as a further part of the consumer protection principle. The FSA should then have a duty to monitor adherence to this principle.

  Retail consumers need more protection than wholesale. Despite the fact that some retail consumers are more expert than others, we think the division should be made between those who buy for purposes outside their trade or profession and those whose business involves buying. This would be in line with other consumer protection legislation.

  If this distinction were made it would assist with defining what consumer protection should mean. It would also help with clause 2(2)(c) (caveat emptor). Wholesale consumers can be responsible for their own decisions. Even under current regulation retail consumers are entitled to be sold products which are suitable. This is a long way from taking responsibility for their own decisions. We would like caveat emptor to go in relation to retail consumers. If it does not, then it should be qualified.

  We support the proposal that improving competition should be an objective of the Authority. This is different from improving competitiveness. Although there are many competing businesses in the industry it does not seem to have the effect of forcing out products which are poor value for money. The Authority needs to have an objective to address this problem. It again could be considered part of the consumer protection objective.

  Anther area we did not discuss in our oral evidence is mortgages. There are overlays between mortgages and the investment products which will be regulated by the FSA. Mortgages are often sold with investment vehicles to repay them or used to buy annuities that are used to pay the interest on the loan. We are publishing a report on the need for improved protection of consumers of equity release schemes on 8 April. It is our view that the FSA should regulate conduct of business in relation to mortgages.

30 March 1999


 
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