FCA will spurn consumer body call to rate firms - lawyer

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The regulator is likely to shrug off calls from the Financial Services Consumer Panel (FSCP) to create a quality rating for firms, on the grounds it does not have the resources to take on the burden, a law firm has said.

The panel wants the Financial Conduct Authority (FCA) to give firms a 'star rating', arguing regulatory fines had virtually no impact on whether or not consumers do business with a company.

But Robbie Constance, regulatory lawyer at RPC,  said the FCA is unlikely to agree to a measure that could prove a "huge burden" if done properly.

The FSCP wants a firm's regulatory history, service level data and consumer feedback combined into one simple rating to allow consumers to shop around and "shun miscreant firms".

Heavier fines and penalties resulting from a tougher enforcement regime introduced in 2010 failed to make an impact on consumer behaviour, with few people switching away from reprobate firms, it said.

A star rating and comparison table would give the FCA another tool to raise standards in the industry, as consumers are given support to vote with their feet, the panel suggested.

Much of the data needed to create a score for firms' behaviour is already available, it said, but it is difficult for consumers to access or interpret.

'Huge burden'

"I can see why the panel wants this and why it might ask the FCA to publish the information it already has, or could obtain, about firms to help consumers. But to do it properly would be a huge burden," Constance said.

"I don't think the regulator is going to want to go through the trouble of collecting the information. It would argue it's not its job and it doesn't have the resources to do it. it has always resisted product or proposition approval or providing a kite mark.

"Firms are obliged to have TCF (treaing customers fairly) policies and to collect management information around them. The regulator could ask them for that information but cannot publish it without amending the Financial Services Markets Act, because it's confidential."

Ineffective

Research commissioned by the consumer panel suggested the FCA's communication of firms' behaviour was not effective, with many consumers stating ‘all firms were as bad as each other'.

The result is short-cut decisions based on price or brand familiarity rather than trustworthiness and whether a firm meets expectations post sale, the panel said.

Consumer panel chair Sue Lewis said: "When people buy a financial product or service, they have no idea how well the firm they are buying from will treat them after the sale. Sadly, their expectations are not high, and they assume that all providers are as bad as each other.

"There is a wealth of information available on the way firms treat their customers, but it is hard to get at or to interpret, so people can't use it for making decisions about which firms they want to do business with.

"We think the FCA should lead the way in combining the different aspects of firm behaviour together in a single measure. At the very least, we believe the regulator should require firms to publish more data about service level and firm conduct, and consider how these can be made most accessible to consumers."

The FCA would not comment on the proposals.

Health warnings

The regulator is currently accepting views from the industry on how firms can communicate better with their customers.

For advisers it suggested a label detailing whether firms offer independent or restricted advice, as well as the charges they levy for one-off, upfront and ongoing services.

It could be a variation of the 'fuel economy label' devised by the US Environmental Protection Agency and on display on all new cars in the States since 2008, it said.


The consumer panel wants the regulator to publish

  • Regulatory history, including fines for breaches of rules and redress packages
  • ‘Hidden' service level data which can provide proxies for accessibility and quality of response, for example whether the firm has a UK contact centre, amount of time spent waiting for a phone call to be answered or where data are held;
  • Aggregated consumer views available from the FCA's existing tracking surveys or through a new, syndicated, survey to which the FCA could require all firms to subscribe.

It recommends the FCA should

  • Evaluate its consumer communications and assess how they could be used more effectively to harness the power of consumers as co-regulators and promote competition that benefits them;
  • Determine which service level measures it should require firms to publish, with data about firm conduct, that are easily accessible by the public. It should also improve its website to provide a comprehensive, easily navigable source of chronological information on all aspects of firms' regulatory history (fines, redress etc);
  • Kick-start development of a simple, accessible measure for consumers to differentiate between firms that are likely to treat them well post-sale.

 Further reading:

FCA bans adviser for misappropriation of premiums

Govt and FCA launch major review of financial advice market

‘Outraged' IFA petitions FCA for independent review of adviser regulation

 

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