Examination of Witnesses (774-779)|
WEDNESDAY 25 JUNE 2003
MS A FOSTER
D WATTS FINANCIAL
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
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.
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
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