The Financial Conduct Authority needs to deliver a quantum leap forward in consumer protection and tackle detrimental business models rather than dealing with their symptoms, according to the Financial Services Consumer Panel.
Speaking at an FSA conference in London this morning where the FCA’s approach to regulation was set out, FSCP vice chair Kay Blair (pictured) said in the past the regulator had been too focused on dealing with individual scandals like payment protection insurance rather than tackling their root cause.
She said: “We want to get rid of the ‘waterbed’ effect, where the regulator tackles one source of sector-wide misselling, another new problem all too conveniently rises up to replace it. This suggests the causes are systemic, built in to business models, rather than random events.
“Over the last few years the FSA has undergone a sea-change in behaviour. However, if we are to see the new more effective regulation the panel has advocated, a quantum leap is now needed.”
The FSA’s conduct of business unit will become the FCA in 2013 and speaking at a Which? conference in London yesterday, its interim managing director Margaret Cole said the regulator will be “courageous” and use its powers to intervene earlier to reduce consumer detriment.
She attacked banks and large financial institutions for basing their business models around aggressive selling tactics.
She said: “It is particularly striking to me that when we have been doing more business model analysis we see how much of the business models of major institutions are being driven by aggressive product sales. If that remains the business model there is always going to be a high risk of misselling products.”
She added: “This industry has not shown us we can afford to trust it.”