UK financial services minister Mark Hoban said today that the country’s new watchdog will ban financial products that are ‘toxic’ for customers for up to a year and will intervene far sooner to stamp out misselling of products.
“There will be a new power to ban products or restrict certain product features”, Hoban said while addressing a conference of the consumer lobby group Which?.
The country must learn from product misselling scandals like the payment protection insurance (PPI) scam by top banks, now being forced to pay billions of pounds in compensation to customers.
“We have faced strong opposition from industry to these proposals but we will not shift”, Hoban said.
Britain wants to end two decades of financial misselling that had cost consumers £15 billion and is reforming the regulatory structure to shore up its banks after the 2008 financial crisis wrecked havoc the country’s financial system.
To monitor domestic banking, it will set up a new regulator under the supervision of the Bank of England and will scrap the current regulator, the Financial Services Authority, by 2013. Instead the Financial Conduct Authority (FCA), a standalone regulator for market conduct and enforcement, will protect consumer interests and promote financial services competition.
The FSA published a paper today on the proposed conduct of the new authority.
Consumer groups can give evidence of misselling to the FCA which will then announce actions it proposes to take with a stipulated time frame.
The FCA will intervene earlier and ban “toxic” products deemed harmful for consumers or promotional materials misleading people.
“At the moment people don’t know which adverts are being withdrawn. We will legislate to make that happen”, Hoban said.
The FCA will also have the authority of completion concerns to the Office of Fair Trade (OFT), which will have to investigate further.
“Under our new regime, we expect the FCA to take the initiative in tackling competition issues that cause consumer detriment”, Hoban added.