Unfair Commercial Practices Directive changes could put consumers at risk

27 March 2012

The Financial Services Consumer Panel has written to the FSA to raise concerns over the possible abolition of the current opt out for financial services in the Unfair Commercial Practices Directive (UCP), currently under review by the European Commission. The current UCP Directive adopted in 2005 regulates the practices businesses may use to sell to consumers. However, Article 3(9) of the Directive allows flexibility for national regulators to introduce more restrictive or proscriptive rules to protect buyers of financial products.

If this provision is removed, it would mean the loss of Member State discretion. The UK has made use of this discretion and there is a risk that hard-won consumer protection rules could be eroded.

In its response, the FSA is clear that it shares the Panel's concerns, and that it has not only been working with the Department of Business, Innovation and Skills and the Office of Fair Trading to retain Article 3(9), but has supplied a significant amount of evidence to the Commission to support the case for maintaining the existing flexibility.

Adam Phillips, Chair of the Consumer Panel, commented:

"The Panel is concerned that consumer protection could be weakened if the directive changes. It is essential that the UK Government and regulators take effective action to keep the review of the directive in check.

The present regime has worked well and we see no need to change it. The Panel is encouraged by the FSA's response that it is actively engaged in discussions with the Commission and other Member State regulators. Given the recent history of financial mis-selling in the UK, now is clearly not the time to be removing or lessoning protections for UK consumers."


Notes to editors

1. 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.

2. 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 our website.

3. Panel members are appointed to serve a maximum of two terms of three years.