The government has been criticised for its insistence that the Money Advice Service (MAS) should be responsible for educating consumers about risk.
An amendment put forward for the Financial Services Bill proposed adding an extra responsibility for the new Financial Conduct Authority (FCA) in its consumer protection objective.
Presented by Labour peers Lord Peston and Lord Barnett, it said the FCA should have regard to "the need to inform and educate consumers with special emphasis on the unavoidability of some risk".
Arguing against the amendment, Lord de Mauley, a government spokesperson for the Treasury, said the FCA's objectives were met through conduct of business regulation, while the MAS would lead the way in financial education.
However, Lord McFall, the former chairman of the Treasury Select Committee, hit out at the "muddled thinking", pointing out the fact that the FCA's original name contained the word ‘consumer'.
"Consumer protection lies with the FCA, whether the minister sees it or not," he said.
"Given the muddled thinking, and given that the Money Advice Service - which, by the way, was lacerated a few months ago when it went to the Treasury Select Committee - is not a consumer protection body, we need a little rethink.
"The minister should take the pills and come back, and then we can get some clarity."
Although the amendment was ultimately withdrawn, Lord Barnett suggested the issue should be debated again at a later stage.