The provision of products and services that ‘do what they say on the tin’ is core to the Panel’s principles of access and trust. Many financial products are an essential component of participation in modern society, making it important that they are accessible to different types of consumers.
Customers should also be able to trust firms to have their best interests at heart. Disclosure of information by itself is not sufficient to ensure that the interests of providers and their customers are aligned. Firms must treat consumers fairly and communicate with them effectively throughout the lifetime of a product.
Equally, it is vital to ensure that consumers have an effective right to redress and compensation if they are mis-sold a product, are provided with a sub-standard service or lose an investment when a financial institution fails.
Savings and Investment
The Panel considers that the Retail Distribution Review (RDR) has made significant improvements to the investment advice market. It made clear how much consumers pay for financial advice, what they pay for, and improved professional standards by introducing a minimum level of qualification for all investment advisers.
We feel the industry has not done as much as it might to put the changes in a positive light for consumers. In particular, when requesting investment advice many people are still unable to obtain from firms a simple estimate of the costs and charges they will incur.
We have also published a discussion paper on investment costs and charges, which looks at the opacity of charges retail investors face and ways of making these more transparent.
The Panel has also for some time had concerns over the market for non-advised sales. To ensure that consumers understand when a sale is ‘non-advised’, and the consequences for consumer protection, we have called for a code of conduct for firms that sell financial products on a non-advised basis.
Mortgages
The Panel has welcomed the FCA’s work on interest‑only mortgages, making consumers aware of potential pitfalls and empowering them to take action at an early stage. The FCA found that around 1.3 million homeowners with interest‑only mortgages due to mature in the next 30 years would not have enough money to repay the full loan amount without making changes to their financial plans.
The Panel has repeatedly called for action to tackle the potential for unfair treatment of people who are trapped in an expensive contract, for example when a fixed‑rate deal ends and they are unable to change product or provider as they no longer meet affordability criteria.
In response to the Mortgage Market Review and as part of the new Consumer Rights Bill, we have suggested a specific rule to protect these ‘mortgage prisoners’ from being treated unfairly, rather than the evidential provision that currently exists.
Consumer Credit
In 2014, we have also seen the Financial Conduct Authority assume responsibility for the regulation of the consumer credit sector, a major change compared to the licensing regime operated previously by the Office of Fair Trading.
The Consumer Panel welcomed the FCA’s proposals for a price cap on high‑cost short-term credit, and the general tightening up of conduct in this market, especially the inappropriate use of Continuous Payment Authorities.
As “mainstream” sources of credit also lead to over-indebtedness, we would like the FCA to also examine the costs of other types of consumer credit – in particular overdrafts and credit cards.
General Insurance
The Panel has published a report setting out six challenges for the insurance industry to improve the market for general insurance in the interests of consumers.
It called for the industry to be clearer about fees and coverage, and ensure information is presented in a way that encourages consumers to look beyond price when comparing policies.
In March 2014, the FCA published preliminary results of a market study into general insurance ‘add‑ons’. It concluded that competition in these markets is not effective and that this can lead to poor consumer outcomes, including paying too much for products bought as ‘add‑ons’.