Speaking at a Treasury select committee evidence session on arrears, Which? principal policy adviser Dominic Lindley said it is difficult for consumers to know what principle-based rules mean because they are vague.
He said: “The problem with the principle-based approach is that it requires strong monitoring and enforcement and we think that is lacking from the FSA.”
Citizens Advice Bureau head of consumer policy Sue Edwards, who was also giving evidence, said: “If you have got principle-based rules, it is quite difficult to apply them because your view of what the principle means might be very different from the lender’s view.”
Labour MP and select committee member Mark Todd said: “It may be understandable in terms of principles to the companies that are seeking to operate it but it can provide no assurance to the consumer because they cannot understand what these principles are and how they might be applied in reality to the products they are being offered.”
Lindley also called for more transparency over charges for consumers in arrears, saying that lenders which levy big charges should be named and shamed by the FSA.
He said: “Until firms see a real penalty from this disclosure, they are not going to change their practices. The FSA has to name these firms. Thousands have been repossessed and the FSA refuses to name which firms it has concerns about.”