FSA to explore more widely the issue of consumer responsibility
FSA/PN/154/2008
19 December 2008
The Financial Services Authority (FSA) has today launched a discussion paper on consumer responsibility to explore what steps the regulator or others could take to help consumers understand and protect their own best interests more effectively.
The protection of consumers is one of the FSA's four statutory objectives, and the regulator adopts a two-pronged approach to achieving its consumer protection and consumer awareness objectives:
- it sets, monitors and enforces standards for firms; and
- provides – or require others to provide – education, information and advice for consumers.
While the FSA has no power to impose responsibilities on consumers, it is required by law to consider the general principle that consumers should take responsibility for their decisions when setting its consumer protection agenda. To this end, the discussion paper aims to provoke debate and bring greater clarity to the FSA's approach to consumer responsibility.
Dan Waters, FSA director of retail policy & conduct risk, said:
"Responsible and well managed firms that treat their customers fairly are crucial. Indeed, to this end, the FSA is strengthening its supervision of firms through the Supervision Enhancement Programme and its Enhanced Strategy for Small Firms. All firms have been warned that they face stronger and more intrusive regulation to ensure they are aware of their responsibilities to treat customers fairly.
"However, we also believe that markets will work more effectively if consumers are more involved, more capable and empowered. While we do not regulate consumers, we believe that we can work with firms, industry bodies and other stakeholders to encourage and enable consumers to consider their own interests more effectively in their decision making.
"We acknowledge that this is a debate that elicits strong feelings on both sides and we are keen to try to find common ground in order to contribute to better understanding and better outcomes for consumers in financial services markets."
The FSA believes that many of the positive outcomes of this work – such as greater engagement, better decision making by more capable consumers, a reduction in complaints and greater understanding around what happens when things do go wrong – may be realised only over the longer term.
However, in the shorter term the regulator hopes to reach a greater consensus among stakeholders as to the nature of consumer responsibilities and the sensible actions that consumers should take when engaging with the financial services industry.
Notes for editors
- The discussion paper ‘Consumer responsibility’ is published today and can be found on the FSA’s website.
- In his speech to the Financial Services Forum on 9 February 2006 - What does caveat emptor mean in the retail market for financial services - former FSA chairman Callum McCarthy summarised an attempt by the FSA Consumer and Practitioner Panels to agree, in the context of an advised sale of an investment product, on firm and consumer responsibilities.
- The FSA made this commitment in its 2008/09 Business Plan: "As part of our work to embed more principles-based regulation and our work on the RDR, in 2008 we will carry out more work on the issue of consumer responsibility. We will re-engage stakeholders and publish a Discussion Paper in Q4 2008 setting out our thinking on the legal position, the actions consumers should take to protect their own best interests, and inviting views."
- The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
- The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.
