FCA to take powers from FSA and OFT

Posted in 'Personal Finance' by Barry Stamp

18 January 2012

The government is in the process of splitting up the Financial Services Authority into two separate watchdogs, one of which is to be a new Financial Conduct Authority (FCA). The FCA is intended to be a single point of reference for consumers. At present, there is some confusion, as consumer credit is regulated under the Consumer Credit Act 1974 by the Office of Fair Trading and other financial services, such as insurance, is regulated by the Financial Services Authority.

Consumers’ Association Which? says that this is a good thing but wants the new FCA to be a ‘watchdog, rather than a ‘lapdog’ and holds up examples of where it sees the FSA as failing to protect consumers, including the poor regulation of overdraft fees imposed by banks, and the mis-selling of Payment Protection Insurance.

A draft of a new bill to revisit the way that credit and financial services are regulated is expected to be published by the government this week and the changes to credit regulation could be in place by the end of 2012.

We welcome the removal of confusion for consumers, but we do have doubts that other proposals to change the underlying law relating to unsecured credit will be as effective as is being claimed.

When the Consumer Credit Act 1974 was put into place, it was the result of the Wilde Report, a wide ranging review of consumer credit, which had all of its recommendations implemented – with the exception of an overall, single point-of-reference regulator-come-ombudsman.

That omission is now to be put right after almost 40 years, but tearing up the Consumer Credit Act 1974 is a very risky thing to do in our opinion.

But then who are we to pass comment? Well, consider this. Some years ago, well before the issue came out into the open, our jargon buster described Payment Protection Insurance as ‘useless and mis-sold’ and as a ,protection racket’. The regulator of the time ordered us to change this. Unbelievable.

See what it says now by taking a peep at the current definition in our free jargon buster and judge for yourself.