The Government-backed National Consumer Council says caveat emptor has an important role in financial services regulation and people must understand their responsibilities when buying products.
Deputy chief executive Philip Cullum says it is vital that consumers realise they “are grown-ups making grown-up decisions”. He says NCC research shows consumers do not support unnecessary regulation and only want what is needed to make markets work, as they ultimately foot the bill.
Cullum believes strong regulation is needed to ensure financial promotions are not misleading and give consumers appropriate information. But he says the regulatory structure should take into account consumers’ responsibility for what they buy.
He considers that the debate over regulation is seen as the industry versus consumers, with the consumer lobby calling for greater regulation and the industry objecting to extra burdens.
But he says there are plenty of occasions when the industry uses extra regulations against the consumer, for example, to inhibit competition or when well intentioned regulations have hit consumers.
Earlier this year, the financial services practitioner panel and the financial services consumer panel clashed over the issue of caveat emptor with the practitioner panel calling for the FSA to designate specific consumer responsibilities.
FSA chairman Callum McCarthy acknowledged the regulator must regard “the general principle that consumers should take responsibility for their decisions” but rejected specific moves to incorporate caveat emptor.
Head of the Tories’ economic competitiveness review John Redwood has suggested that caveat emptor should play a greater role within financial services regulation.
Cullum says: “Caveat emptor has an important role to play in financial services regulation. We must ensure that consumers understand the responsibilities they have.”