Examination of Witness (Questions 140-151)|
TUESDAY 5 FEBRUARY 2002
140. There seems to be £22,000 gone astray.
Are these the only accounts you produce or do you produce for
your own panel proper accounts?
(Mr Brown) We produce a longer version for our own
141. Could you submit that to this Committee?
(Mr Brown) Yes.
142. Because it is not in the FSA's accounts
and it is quite a sizeable sum.
(Mr Brown) We would be very happy to.
143. In view of the inaccuracy, we ought to
be clear where the money is going. Could you do that?
(Mr Brown) Yes.
144. Are you sure that your table on page 22
about people's dissatisfaction with these products is saying very
much? After all, if you are someone who is happy having bought
stocks, it rather depends whether they have gone up or down. They
tend to go down almost as much as they go up in the long run;
whereas if you buy an endowment policy this is a very different
kettle of fish where you are locked into a financial arrangement
for half a lifetime. Do you think it might be a good idea if you
start to distinguish between these two types in your subsequent
(Mr Brown) I agree that regrets can come from all
sorts of different directions and that one should not read into
this that this is an indicator of mis-selling or something fundamentally
wrong with the design of the product. We just wanted to get an
indication of those products which people felt grumpy about.
145. Do you think it might be a good idea to
differentiate between these? I could read this table and conclude
that 94 per cent were happy with their PEPs; 92 per cent with
their investment bonds; 92 per cent with their repayment mortgages
and 92 per cent with the personal pensions, but that is not the
impression you are trying to give in this table at all.
(Mr Brown) No. We were exploring those things that
people were unhappy with.
146. We are all agreed that there is understandable
consumer ignorance about many of the products which people are
forced to purchase. In trying to deal with that ignorance, have
you considered working with any other institutions or bodies which
could develop programmes in schools to enable people entering
the labour market to have a better understanding of what they
end up buying?
(Mr Brown) I ought to say what really is our job and
what is the FSA's job here. The FSA has a considerable education,
consumer awareness remit and a considerable programme, particularly
in schools. One of their achievements is getting it onto the national
curriculum and they produce materials and so on. It would not
be an activity that the Panel itself would carry out. We would
talk and do talk with the consumer education department at the
FSA, but we are not doing it ourselves.
147. Related to that, people are buying products
in ignorance. People do not read the small print and that is made
clear in a number of your questionnaires which you advance. You
want to prevent the public being ripped off. That seems to me
to be very high on your list of priorities. One of the points
you made at the beginning was that you were concerned that the
FSA might use its opposition to zero regulatory failure as an
approach to create or allow an environment to be created in which
there might be an unacceptable level of rip offs. I want to put
to you that the main reason why so many people seem to be happy
with products which they have bought, even though they do not
understand the fine print, is competition. It is competition in
the market that creates better, cheaper products. Is not the strongest
possible benefit that is going to come to consumers in this market
going to come from a reduction in prices as a result of competition?
Do you have that as something which you are also monitoring, ensuring
that those bodies responsible for monitoring competition are doing
(Mr Brown) The Panel does place a high value on competition
and we note one of the principles of good regulation included
in the Act that the FSA has to abide by is on encouraging and
not squashing competition. However, we have to be realistic about
which products, which financial services, respond to competition
and which do not. It is quite clear that in the mortgage market
there is a degree of competition which we do not see in other
parts of the market. In the mortgage market, we have seen consumers
exercising choice and driving better deals because of the numbers
of products on the market. We have seen the prices of other products,
investment products, come down as a result of regulatory intervention
on CAT standards and stakeholder pensions. I think it is important
that competition is not damaged but we have to be realistic. Sometimes,
financial purchases are so rare that consumers do not build up
experience in repeat purchase like they do in other markets and
there is such an asymmetry of information between the provider
and the consumer that the normal rules of shopping around and
the impact that has on price and quality of product do not apply.
148. You began that reply by saying that you
placed great emphasis on competition. If I may say soand
I have not read the Home Office documentI cannot find very
many references to your monitoring of the relationship between
regulation and competition which, after all, seems to me to be
the crucial relationship which will decide whether consumers will
get better value for money and lower prices in the long run.
(Mr Brown) We would not agree with you that it is
the crucial issue. In the period we are in now in financial services,
regulation for consumer protection is the crucial issue. We agree
that, in circumstances where those consumer protection measures
inhibit competition to the detriment of the consumer, there is
something to worry about. We should be looking at that. Of course,
that is a central issue in the polarisation debate. We will take
that on board. Our main concern, given the experiences that consumers
have had in the market place over the last 15 years, still has
to be consumer protection from the mis-selling and other things
that are done to them.
149. You have a long report on that and the
relationship between that and consumer attitudes. Could we also
have something on competition in your future reports, what you
have done to monitor and improve the effectiveness of competition
(Mr Brown) Given the issues that are live in the regulatory
debate at the moment, there is bound to be discussion on competition.
150. Can we have something in your report on
(Mr Brown) There is bound to be something in the annual
151. When I was questioning you earlier about
the Equitable situation, you were not absolutely sure understandably
when, after the Panel was set up in December 1998, you received
your first substantive briefing on the matter. This may be an
unfair question to drop on you from the air but could I ask, through
the Chair, whether it would be possible for us to get a note from
you later on when you have that substantive information?
(Mr Brown) Yes.
Chairman: Thank you very much. It has
been very helpful. We have taken you down a lot of paths and avenues,
some directly and others indirectly. We hope to continue that
relationship in the future. Looking at your report, it is very
clearly written. I notice that in appendix seven you have a glossary
and you also have defined terms in highlighted colours. That is
a contribution to helping consumers in the plain English debate.
Your report is thicker than the Practitioners', so I look forward
next year to both your reports being even thicker.
7 Ev 23. Back
Note by Witness: It was in October 2000. Back