MPs have called on the Government to scrap plans to promote the new Consumer Protection and Markets Authority as a consumer champion.
In its report on regulatory changes, published last week, the Treasury select committee says using the phrase could mislead consumers.
It says: “We strongly urge the Government to drop the title of consumer champion from the CPMA.
“If a regulator is promoted as a consumer champion, consumers may falsely believe all financial products are risk free, creating moral hazard. It is simply not possible to protect every interest at all times.”
But Financial Services Consumer Panel chairman Adam Phillips does not think the title should be dropped.
He says: “The panel is concerned that memories are already fading of the major misselling scandals, when too little was done too late to stop the sale of harmful products.”
Annuity Direct chief executive Bob Bullivant says: “Consumer champion suggests a bias and implies that consumers do not need to worry about their financial decisions. The question here is to what extent should the regulator try to save the consumer from themselves.”
The select committee report says effective regulation should be in consumers’ best interests and regulators should ensure regulation is effective and proportionate.
It adds the CPMA should have competition as a primary objective as it is an effective way of protecting consumers.
Derbyshire Booth Financial Management managing director Greg Heath says competition will provide better outcomes if companies causing problems face stiffer regulation and higher fees.
He says: “At the moment, the regulator is treating everybody the same but it should take a more hands-on approach with firms that cause problems, for example, by looking at where the complaints to the Financial Ombudsman Service come from.
It is a carrot and stick approach and right now they seem to be using just a stick.”