Select Committee on Treasury Minutes of Evidence

Examination of Witnesses (Questions 240-243)


24 OCTOBER 2006

  Q240  Chairman: In terms of financial promotions, there is still a bit the FSA could learn from the Advertising Standards Authority. As we mentioned earlier, we will write to you on that and try to get your views in that particular area. My last question has a constituency element. I have been contacted by a number of constituents, and I presume other Members of Parliament have been contacted, with regard to the collapse of Farepak savings scheme. Only this morning I had an email from a constituent, which said: "Myself and a number of my workmates have been robbed in broad daylight by Farepak. Since January all the girls within our workplace have been saving for Christmas. We have scraped together the weekly payments only to be informed now, when we have fully paid up our purchases in advance, that our hard savings are gone." They are obviously asking me and others to see what we can do about it. I do note from a newspaper report that Ian McCartney, the Consumer Affairs Minister, will meet the Financial Services Authority and the Office of Fair Trading to discuss tighter regulation for the savings club market following the collapse of Farepak nine days ago. There are 100,000 customers thought to have lost savings up to £15 million due to that demise. Do you have any comments on that or any information you can give us in terms of a meeting with Ian McCartney?

  Sir Callum McCarthy: I would say two things. One is that I have huge sympathy for the people who have lost money in this way and the second is that the FSA has no responsibility whatsoever at the moment, as the law is drafted, for this sort of scheme. It would require a change of law to give us responsibilities.

  Q241  Chairman: We are not asking for a change of law, but again we are talking about restoring confidence in long-term savings. Here is an issue where people at the modest end of the market are putting their savings aside and they are blown before Christmas.

  Sir Callum McCarthy: In so far as I understand the facts, I think this is a dreadful occasion and I have great sympathy for the people. We will sit down and explore with Mr McCartney or anybody else who wants to talk to us about it and explain the responsibilities.

  Q242  Chairman: Do you think it is worthy of exploration and that the FSA can contribute to that debate?

  Sir Callum McCarthy: I do not know enough about this sort of savings market to know, in terms of a policy initiative and in terms of public policy, which is the best bit of the government machine or the quasi-government machine as a whole to deal with it. That is the thing that would have to be explored.

  Q243  Chairman: Yes. But when you have people's individual savings going up in smoke, just like that, there is a public policy issue here, and you, like others, can contribute to that.

  Sir Callum McCarthy: Yes.

  Chairman: I think we have covered a lot this morning. Thank you for your attendance. We look forward to a continuing contact with you. Thank you very much.

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