Consumer responsibility under the spotlight
The extent to which people should take responsibility for their own money issues is to be explored by the financial watchdog.
The Financial Services Authority (FSA) says it is looking at steps it could take to ensure people “understand and protect their own best interests more effectively”.
Dan Waters, director of retail policy & conduct risk at the FSA, says responsibility for ensuring good financial well-being doesn’t just lie with banks.
“We also believe that markets will work more effectively if consumers are more involved, more capable and empowered,” he adds.
The debate on who should take ultimate responsibility for issues such as debt or a lack of lifetime planning rarely fails to elicit strong feelings. The FSA’s consultation has already prompted criticism from consumer groups, who are concerned that putting too much emphasis on consumer responsibility provides a smokescreen for banks to act unfairly.
The Financial Services Consumer Panel (FSCP), an independent body that represents consumers to the FSA, questions the timing of the consultation.
Adam Phillips, acting chairman of the FSCP, warns that large sections of the financial industry are not giving consumers a fair deal and have put pressure on the FSA to focus on consumer obligations.
“While we are not arguing with the need for consumers to answer questions honestly and read key information, the FSA document provides an opportunity for the industry to attack consumers’ rights, when it is the industry itself which needs to get its house in order and take responsibility for its actions,” he explains.
Meanwhile, the Office of Fair Trading has published responses to its consultation on irresponsible lending. The watchdog has been examining issues such as the way banks advertise and sell loans, and the way they use credit scoring, handle defaults and judge people's ability to repay credit.
Who should take the most responsibility for personal debt - us, as consumers, or the banks?
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.