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City watchdog, the FSA (Financial Services Authority), is failing to protect consumers adequately. So says consumer advocate, Which?
Which? - a long time critic of the FSA - says the watchdog, which has been regulating financial services firms since 2001, still had a 'long way to go' in terms of fulfilling its brief.
It looked at a number of key issues tackled by the FSA and assessed whether they have done enough to protect and inform consumers.
On the financial promotions front Which? claims the lack of bold action to name and shame firms limits the effectiveness of a potentially powerful tool to improve industry practices. It argues that unlike the Advertising Standards Authority (ASA) approach, the FSA doesn't report publicly which adverts or promotions have been complained about or the outcome of its investigations unless full enforcement action has been taken. As a consumer, receiving no feedback or details of outcome would be a significant deterrent to complaining.
It believes that financial advertising and promotion should be open to the same scrutiny as general advertising is with the ASA; that all complaints and investigations should be published and that present FSA processes are not a strong enough disincentive for financial companies bending the rules on their promotions.
As for mystery shopping Which? says the FSA should be bolder about publishing the outcomes of its mystery shopping exercises. This is particularly important given the FSA's move towards high level principles of regulation, which devolves more responsibility for treating consumers fairly to directors.
Which? adds that if the FSA is committed to the high-level principles approach of delegating even more responsibility to directors, this needs to be accompanied by a more robust approach to investigating firms' behaviour. Mystery shopping, if done properly, is an excellent way of doing this.
Louise Hanson, head of campaigns at Which?, said:
"The FSA has had a busy five years and yet many of their major challenges in the retail financial area have left consumers exposed. We believe they have not been open and transparent enough in tackling detriment or in robustly challenging the industry.
"Which? isn't calling for more legislation or regulation, what we need is better regulation and the FSA to use its existing powers and tools more flexibly and more imaginatively to ensure proper enforcement and an effective deterrent for industry."
04 December 2006 © Moneyextra.com
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