Select Committee on Constitution Minutes of Evidence

Examination of Witnesses (774-779)




  774. Good afternoon, thank you both for being with us. May I invite you both to identify yourself for the record before we get under way?

  (Ms Foster) My name is Ann Foster and I am the Vice Chairman of the Financial Services Consumer Panel.
  (Mr Watts) My name is Dave Watts and I am a member of the Consumer Panel.

  775. Are there any opening comments you would like to make before we put some questions to you?
  (Ms Foster) Yes, I will just make a very short opening statement if I may? The panel was set up in 1998 as an independent body to provide advice to the Financial Services Authority from the consumer perspective. The emphasis of our work is on those activities which are regulated by the FSA, but we can go further and we can make representations on related areas, both to the FSA and indeed to the Treasury. In many ways we are different from the other consumer bodies related to different regulators which are under review. Our regulator is not an economic regulator as such. Financial Services is already a highly competitive market and there are approximately 11,000 regulated firms. Potentially, this will increase to some 45,000 regulated firms with the inclusion of mortgage sales and general insurance sales. There are also thousands of products available on the market, so it is a very competitive market, yet at the other end of the scale, it is not a market where consumers can operate with confidence and with ease. For many consumers, this is a very, very complicated market. They find the products complex, they often do not understand what they are doing and they do not understand the nature of investments or necessarily the nature of risk. There is also lack of confidence in the market as a consequence of the recent events. Our view is that there is a need for very robust regulation and we turn to the FSA for that. That is the focus for our advice. We too have the same number of consultation documents coming to us, indeed we only meet on average three times a month per member, so we have to deal with the same amount of consultation. We work in small groups and we have to work both at the high level policy level and also very much at the detailed level of rule making. We are very familiar with what the previous speakers were talking about. I have to say that, whilst they were critical of the FSA not necessarily prioritising, our response to that is that we do our own prioritising. You have our annual report and you have our submission and we shall be very happy to answer questions on that.

  776. May I start by inviting you to say a little more about the organisation in the sense that your function there is to represent the interests of the consumer and I see from the membership of the panel that it is a membership drawn from people who deal with consumer issues. Is there any mechanism by which you can make sure people do actually know the views of the consumer?
  (Ms Foster) We have various ways of doing that. The background to all of the panel members is, in some form or other, consumer affairs, advice agencies, debt management, matters like that. We do it in several ways. Our members bring their experience obviously and some of them are full-time practitioners in the field, particularly working with low income consumers. We also undertake research on our own behalf so if we are unsure of what consumer concerns may be or what views may be, we will undertake that research and we have done that in relation to opening basic bank accounts for example. We also have regular meetings with other consumer bodies: the main consumer bodies like the National Consumer Council and the Consumers' Association, but also with much smaller organisations who may have a single interest, like organisations which represent older people and maybe just a particular concern about pensions. The other thing we do is hold one of our meetings out of London each year. This year we went to Belfast, the previous year we went to Edinburgh, and on that occasion we linked very much with those organisations which are working there. On our most recent visit to Belfast, we all went off for an afternoon to various advice agencies to listen to the problems they were having dealing with the concerns of low-income consumers. That is how we try to get a representative view.

  Chairman: Fine; that is very helpful.

Baroness Gould of Potternewton

  777. May I just pick up some points you made and perhaps elaborate a bit? I perhaps ought not to declare an interest but just to say that I do know a number of members of your Consumer Panel and I do understand the experience they actually have. You say in your note that in fact you do not, for instance, undertake consumer education. In your annual report you say you continued to express concern at the FSA's consumer work. I wonder whether you can elaborate a little more about that, because it does seem to me that the education role for consumers is without a doubt the most important role, so that people know exactly what their rights are. You also say that you do not take up independent consumer complaints. If you do not, who does? What is the mechanism for taking up complaints? My last point is that you said you actually do surveys and other things to try to find out what consumers want. What sort of budget do you work on to be able to carry out that role effectively?

  (Ms Foster) It is not part of our remit to undertake consumer education, that is very much a statutory responsibility of the Financial Services Authority. Obviously we take a great interest in what they do and how they do it. Whilst we have been appreciative of some of the work the FSA does, indeed quite a lot of it, we have felt that an overall strategy was lacking. We have, for example, been appreciative of the work the FSA has done in schools with school education in getting these sorts of subjects onto the national curriculum. We have also been very appreciative of the leaflets which the FSA puts out and they actually do a very good job in putting out information in plain language, which is a considerable challenge in this field. Nevertheless it is a huge job to aspire to educate consumers on financial matters. It is such a complex area and there are so many people who need to have a little bit of understanding and more who need to have a better understanding. There is no point simply expending resources willy-nilly, there has to be a clear strategy and the FSA needs to identify those groups of consumers who most need particular types of information. The FSA is reviewing its strategy on consumer education and we are very glad they are doing this and we would hope we will continue to put a major input into this process because it is very important. Even with the resources which the industry and the FSA have, they are not going to be able to get to everybody. There has to be a clear strategy. We do not deal with consumer complaints, in fact if the consumer has a complaint about a firm, they are advised to go to the firm in the first place. If they cannot get satisfaction from the firm, then they go to the Financial Ombudsman Service. That is the route for consumer complaints.

  778. Who gives them that advice?
  (Ms Foster) If they ring up the FSA helpline, which is a widely publicised telephone service, the helpline operator will listen to what the consumer's complaint is and then send them off in the right direction. If it is a complaint about a product or a sales process, then it will be to the firm and if they cannot resolve their complaint with the firm, the firm will give them information about complaining to the Financial Ombudsman Service if they are not satisfied. We have regular contact with the Financial Ombudsman Service because obviously it is important for us to know the kinds of things people are complaining about. We are also concerned about the way the Financial Ombudsman Service actually does deal with consumer complaints in terms of meeting their performance standards, such as how quickly they can deal with these. It is not our role to deal with individual complaints, but we do work closely with FOS. In terms of the cost of our research, our total budget for 2002-03 was about £600,000 and that covers the cost of our secretariat. The amount of money which is put aside for research in that budget is, from memory, around £200,000. If that is an incorrect figure, I will let the Clerk know the correct one.[2] That seems rather a lot of money, but that is because every so often we like to do a big omnibus survey looking right across the piece at consumer concerns and we plan to do that this year.

  (Mr Watts) With the surveys we do, we are trying to do a long-term survey to measure how effective the FSA has been in educating consumers and in changing consumers' attitudes towards financial services. Consumer education is a huge, huge task, massive, and the FSA cannot hope to do that on its own. It will have to work with the industry and change the industry attitude and culture towards giving advice and good consumer education and indeed within the FSA. We felt on several occasions that the consultation papers which had come out were saying that there is a big part to be played by consumer education here, but they have not specified how that consumer education is going to take place, which is why we are saying there needs to be a very clear strategy.


  779. So over time you are asking the same question, so you can see whether there is a pattern.

  (Mr Watts) Exactly.

2   Note by the witness: In 2002-03, the budget for professional fees was £223k, of which £155k was earmarked for research. However, actual research expenditure in 2002-03 was only £90k as the Panel undertook more targeted research and did not commission the general survey it carried out in 1999 and 2000 (and which it intends to repeat in 2003-04). Back

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