Stronger consumer representation is needed at the regulator, according to the Treasury select committee chairman.
Speaking at the Tax Incentivised Savings Association conference held in London last week, John McFall raised concerns about the potential conflict of interest that existed within the regulatory body.
He said: “On the one hand they are responsible for the prudential supervision of systemic firms. On the other hand they are tasked with ensuring customers get a fair deal.
“When the chips are down, the FSA will incline towards preventing a firm from getting into difficulty rather than looking out for the customer’s interests.”
Mr McFall said as the chairman of the Treasury select committee he was inundated with complaints regarding both financial companies treatment of customers and what consumers felt was the FSA’s “inadequate response”.
He said: “Perhaps the perception that the FSA sides with industry rather than the consumer more often than not is linked to the fact that so many senior FSA executives are from the City themselves and that is something which should be considered.
“I accept that the FSA has a very difficult balancing act to do but maybe we need an independent consumer body, one with clout, to stick up for consumers. This is a potentially fruitful area of investigation.”
During a question and answer session following his speech, Mr McFall said consumer representation in the UK was abysmal and communication between the banking sector and its customers was one-way.
However customers were now becoming more careful with who they were banking with and Mr McFall even said he had been told anecdotally that sales of home safes were increasing as mistrust of financial institutions grew.
He said: “I know from talking to my constituents that they are spending more time looking at their own due diligence before using financial services, because people are urgently seeking out providers whom they can trust.
“The response of the banking industry will be crucial to this increase in consumer activism.”
Sarah Smith, mortgage associate of Birmingham-based IFA money4dentists, said banking institutions needed to be seen to be listening to the public if trust in the sector was going to be restored.
She said: “It is going to take time and consumers will remember those Northern Rock queues for a while so they will all have to do their bit to make consumers trust them again.”
Source: FT Adviser
Huntswood