MPs urged to deliver effective consumer protection

The Financial Services Consumer Panel has today urged MPs to make sure the new Financial Services Bill delivers genuine consumer protection. This proposal coincides with today's Committee stage of the Financial Services Bill where MPs are set to debate the responsibilities of the financial services industry.

The briefing paper from the Consumer Panel sets out the case for a fiduciary duty of care principle to be imposed on the providers of financial services. This would ensure that the industry delivers what consumers already expect, it would deliver stronger consumer protection standards, encourage greater trust in firms and, support a more straightforward and effective regulatory regime which would be better for both the customer and the industry.

Adam Phillips, Chair of the Consumer Panel, commented:

"Given the clear failures by providers of financial services to treat their customers fairly we believe the new act should require the industry to provide the service that consumers expect. Customers of banks should be owed the same fiduciary duty as those seeking the advice of a lawyer or an MP, with providers prohibited from profiting from conflicts of interest at the expense of their customers.

The Panel has suggested an amendment which, if supported by MPs, will allow the UK authorities to follow the recommendation of the Joint Committee of Parliament which examined the draft Bill in 2011 and which called for a clear responsibility on firms to act honestly, fairly and professionally in the best interests of their customers¹.

The Panel believes that the new Financial Conduct Authority (FCA) should be given powers to make rules to ensure that the industry would have to take their customers' interests into account when designing products and providing advice."

Notes to editors
 

1. Paragraph 126 of the report of the Joint Committee on the Financial Services Bill.

 

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3. The Consumer Panel's position paper on fiduciary duty[1] is now available.

 

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5. The Consumer Panel's amendment is as follows:
   1. Consumers best able to take responsibility for their decisions if authorised persons have an explicit Fiduciary Duty towards them:

      Adding a sub-clause to 3B(1): "(g) the principle that, where appropriate, authorised persons should have a fiduciary duty towards the consumers who are their clients".
       

6. The Consumer Panel fist called for a new duty of care when the Joint Committee first debated the Draft Financial Services Bill[2].

 

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8. 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.
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10. 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.
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12. Panel members are appointed to serve a maximum of two terms of three years. Further information on individual members.