As a general philosophy, the Liberal Democrats are committed to a competitive marketplace in which customers have real freedom of choice to obtain the best quality product at the cheapest price.
In practice, though, competition is often deficient and consumers are taken advantage of. Rip-off Britain is alive and kicking. Sectors where the products are complex or are sold to vulnerable consumers are particularly at risk of “misselling” and the associated bad publicity.
While a substantial number of additional regulatory burdens have been introduced during this Parliament, including a degree of consumer credit legislation and the creation of the Financial Services Authority, there has been a notable absence of regulations specifically to protect vulnerable consumers. Addressing the issue of protection of vulnerable should be a key concern for the next Parliament.
In the area of mortgage regulation, the Government has been dilatory.
It is anomalous that mortgages are not regulated by the FSA. This is despite known serious abuse in the industry – the usual abuse being the cross-selling of mortgages with insurance products.
The Financial Services Bill committee recommended mortgages to be brought within the remit of the FSA. However, the Government has only recently and grudgingly acted to replace the bank's voluntary code.
An action for the next Parliament would be to agree to the amendment I introduced to the Financial Services Bill to bring mortgage advice and lending within the legislation.
In the area of endowment mortgages I have been dissatisfied with the responses of the Govern-ment and the FSA which have been in marked contrast to their approach to pension “misselling”.
Yet many people have been left high and dry when they cannot repay their mortgage because their endowment policy has underperformed. This is an extensive problem and consumers now need a system that provides speedy redress in relation to the insurers and banks responsible.
Turning next to the FSA, I welcome the idea of a unified statutory regulatory body for with-profits institutions. I do, however, question its effectiveness in the role of protecting the consumer. The recent Equitable Life debacle has highlighted grave weaknesses in the protection offered by financial services regulation.
Financial services companies struggle with an over-complicated rulebook and the officials regulating them do not necessarily understand the industry. This needs to be addressed.
As a spokesman for the organisation Save our Building Societies, I believe strongly in diversity of ownership in the financial services sector. The concept of mutuality has conveyed significant benefits investors and borrowers.
Mutuals have had a good track record of consumer service, particularly in the area of mortgages. The sector has suffered significant erosion, particularly the insurance and building society sectors, from the actions of carpetbaggers.
I have pressed for legislation for greater protection for mutuals from the capricious attacks of carpetbaggers without under- mining the rights of mutual owners. This is an issue that should be taken up in the next Parliament.
Finally, on the important issue of insurance polarisation I believe that genuine independence of independent financial advisers is important for consumers.
The proposed relaxation of the polarisation rules would effectively make IFAs the scapegoat for some of the abuses that have occurred in big financial institutions. Polarisation should be maintained for the benefit of consumers.
In conclusion, the next Parliament could keep itself usefully busy as the champion of consumer protection.