18 January 2012
The Financial Services Consumer Panel has today called for the new Financial Conduct Authority (FCA) to be given full responsibility for the regulation of retail financial services, including consumer credit.
The Treasury and the Department for Business and Skills are shortly due to announce the results of their consultation on how consumer credit should be regulated. The FCA will take over from the FSA once the anticipated Financial Services Bill is enacted. The Panel believes that consumer credit regulation should be transferred from the Office of Fair Trading (OFT) to the FCA.
Preserving existing consumer protection mechanisms must be the overriding priority for the reform of credit regulation. The Panel believes that a two stage process is necessary starting with the FCA taking over responsibility for regulating credit under the Consumer Credit Act (CCA). A subsequent review would examine when it would be appropriate to move to an integrated Financial Services and Markets Act-based regime.
Adam Phillips, Chair of the Consumer Panel, commented:
"The Panel is calling for a commonsense reform that will enhance consumer protection. Transferring the Consumer Credit Act powers to the FCA will make retail financial services regulation work in the way most people expect. Consumers would be surprised to learn that the FSA regulates the notification of an unauthorised overdraft and the grounds on which payments may be bounced but not the overdraft itself, which is regulated by the Office of Fair Trading. In the circumstances, it's not surprising that banks have been able to profit from the resulting confusion.
The Government can only deliver its vision of a powerful conduct regulator if the FCA has comprehensive responsibility for the whole retail market whether consumers are saving or borrowing money. The creation of the new regulator is a golden opportunity to end the historical anomaly that leaves consumer credit alone outside FSA regulation."
Notes to editors
- The Consumer Panel position paper on Consumer Credit Regulation
- The Consumer Panel's research on Consumer Credit
- The Consumer Panel is a statutory body under the Financial Services and Markets Act 2000 and was initially established by the Financial Services Authority in December 1998. The Panel advises the FSA on the interests and concerns of consumers and reports on the FSA's performance in meeting its objectives.
- The emphasis of the Panel's work is on activities that are regulated by the FSA, although it may also look at the impact on consumers of activities outside but related to the FSA's remit. More information about the Panel's work is available on this website.