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FCA plans further crackdown on bank sales incentives

Martin Wheatley 480

The Financial Conduct Authority is planning a further crackdown on banks’ sales incentive schemes to stop consumers being “exploited”.

In its first annual risk outlook, published today, the FCA says it will follow its guidance on sales incentives in 2012 by considering whether more intrusive supervision is needed.

It states: “Some firms’ cultures, processes and products have been designed to enable them to profit from consumer errors and to exploit their superior access to, or understanding of, information on financial products and services.

“This can mean that consumers may not be getting what they need and that firms do not act in consumers’ best interests.”

It adds: “We will seek to address cultural issues and incentive structures that narrow consumer choice or create a significant incentive for inappropriate or indiscriminate targeting of consumers.”

In the short-term, the FCA pledges to improve the disclosure of product pricing structures and charges while clamping down on firms offering misleading headline-grabbing rates.

In September, the FSA launched a review of sales incentive schemes and found 20 out of the 22 firms assessed had features that increased the risk of misselling.

Lloyds Banking Group is under FSA investigation for its scheme.

The FCA also warns firms should re-assess the suitability of their distribution channels to “push additional products” post-RDR.

It states: “Risks could be created by firms changing distribution strategies in response to the RDR and competition from other sectors.”


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. It is not the sales ‘incentives’ you need to worry about. It is the sales ‘penalties’ if targets aren’t reached that cause the problems in UK banking. The target culture is alive and well. However, it is the management practice that dare not speak its name now.

  2. For me the key phrase is…. “This can mean that consumers may not be getting what they need and that firms do not act in consumers’ best interests.”

    Consumers are going to the banks for ‘advice’ and if that still doesn’t involve the prerequisite that the advice must be in the consumer’s best interest then there is something very very wrong.

  3. Totally agree, it’s not the incentives as such but the mandatory targets set irrespective of duty of care to customers. Think the FCA need to refocus on to this

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