Lipsey made controversial remarks, as reported by Money Marketing last September, that some policyholders who were compensated in the pension and endowment reviews should not have received a payout because they were not telling the truth.
As a condition of his appointment, Lipsey is resigning the Labour whip in the Lords.
He will take over from John Howard who chaired the panel from October 2005 to March 2008.
Lipsey is an active member of the House of Lords, who has a background in journalism, financial services and regulation.
FSA Chairman Callum McCarthy says: “I am very pleased that David Lipsey has agreed to become Chairman of the Consumer Panel. He brings a wealth of experience in regulation, financial services and communications and will no doubt provide challenging ideas on behalf of consumers to the development of policy at the FSA.
“We look forward to David building on the work carried out under the previous Chairman John Howard, who has ensured that the Panel has continued to provide a strong independent consumer voice to the FSA.”
Lipsey adds: “I am delighted to be taking on this role at a crucial time for the financial services industry. I hope to raise the profile of the panel a notch or two so it can be even more effective in future in advancing the consumer interest.”