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
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