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FCA under fire for failing to track consumer outcomes

The National Audit Office has criticised the FCA and three other regulators for failing to prove how they are responding to consumer problems and not offering enough protection to those in need.

In a report today the NAO found that the regulators understand the significant difficulties facing consumers in the financial services and utilities markets, but “cannot prove if they are effectively responding to consumer concerns or offering enough protection for those who need it”.

The NAO’s criticisms were directed at four main regulators: Ofwat, Ofgem, Ofcom the FCA.

These regulators have a duty to protect consumer interests by promoting competition, encouraging fair prices, setting maximum prices where competition is insufficient, ensuring adequate services are delivered and preventing unfair practices.

The NAO found the most common problem people seek help with across all four regulated sectors debt on utility bills and credit repayments.

It also highlighted the difficulties consumers face in finding the best deal, with customers who fail to regularly switch providers collectively facing a “loyalty penalty” of at least £4.1bn a year.

The problem is particularly severe for vulnerable customers who are less likely to switch supplier.

The NAO called for more robust systems to monitor regulators’ success in dealing with these problems and for co-operation across the sectors they oversee.

It also warned that regulators and government need to work more closely together to resolve “conflicts or trade-offs” between their different objectives.

NAO head Amyas Morse says: “Regulators need to do more to show the concrete results they are aiming to achieve for consumers.

“I understand that there is a difficult balance to be struck between long- and short-term outcomes, between the needs of businesses and the interests of consumers.

“But at present the regulators’ results can come across as somewhat academic and detached from peoples’ practical concerns and pressures.”

FCA chief executive Andrew Bailey says: “Protecting consumers is absolutely central to the FCA and where we have identified potential harm we have taken decisive action. Our recent work in the high-cost credit market, including implementation of the price-cap in the rent-to-own market, is just one example of this.”

“Understanding the impact of our interventions is an important part of our mission to ensure that financial markets are working in consumers’ best interests.

“We will consider the National Audit Office’s recommendations when evaluating our work to protect consumers.”

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. “We will consider the National Audit Office’s recommendations when evaluating our work to protect consumers.”

    Says it all… “we’ll evaluate ourselves thank you very much.”

  2. When IS the government going to DO something about the FCA?

  3. I always have a little ironic chortle to myself every time some maniacal MP reaches for the regulatory syringe for yet another quick fix without ever considering the oxymoronic nature of doing so.

    Regulators are invariably brought in to control charges (ie costs to consumers), to rein in bad practice and to control monopolistic power. And yet no-one ever seems to spot that the regulator is a monopoly supplier, has no cost control or accountability and mostly fails to deliver any useful end product.

    As I say, I chortle every time. And then I weep.

  4. It does on relation to financial advice – Assessing Suitability Review (ASR) was intended to be a tracker of consumer outcomes. ASR2 due this year* to see how outcomes have changed.

    * I think it will be delayed by 6 – 12 months

    • Indeed it does but it’s a small component of a much larger piece.

      The criticism was the FCA is “failing to prove how they are responding to consumer problems and not offering enough protection to those in need” and “at present the regulators’ results can come across as somewhat academic and detached from peoples’ practical concerns and pressures”.

      I think many people, including advisers, firms and consumer groups can relate to this. Historically, PPI is an example of a problem that took years to address – done earlier it could have saved a lot of cost and pain for consumers. Currently, there is a pending DB transfer crisis – the FCA did not pro-actively and robustly deal with the potential problems – they just stood back and told advisers to do it properly. Now the problems are manifesting it is just tinkering at the edges with a few firms, issuing guidance, and making small rule changes. How does that make real change to behaviour and client outcomes?

      SIPPs – the FCA have known (surely) for many years how they were being used for unregulated investments yet it waits for a court case to address it. If the ‘problem’ was so obvious to the FOS why hadn’t the FCA taken decisive, unequivocal action?

      All the above are about real outcomes. I think that’s what the NAO are getting at.

      There’s an old saying:

      “Some people make it happen, some people watch it happen and some people ask ‘what happened'”

  5. We will consider the National Audit Office’s recommendations when evaluating our work to protect consumers.

    In other words, nothing will change because no body exists to enforce against the FCA the will of any outside party. The FCA’s catalogue of failures to protect consumers ifs both long and shameful.

    • From experience as a consumer the FSA investigate nothing and hide behind the our work is secret….. in other words we are not accountable and able to nothing.

      I’m sure I’m not the only consumer who feels like this, when you can’t trust the regulator to regulate it’s hardly surprising Sipp operators have be lining their pockets at any and all opportunity

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