Pandemic prompts UK watchdog to devise a rip-off detector
LONDON – Britain’s markets watchdog says the coronavirus pandemic has shown a need to reinforce consumer protection and it will draw up new longer-term measures to help detect if vulnerable customers are being ripped off.
The epidemic has already prompted the Financial Conduct Authority (FCA) to propose several measures such as easing the burden of credit card payments for cash-strapped consumers now in their third week of lockdown and with no clarity on which businesses will survive.
On Tuesday it said pricing practices in general insurance, cash savings and home loans had already showed how markets can fail to offer fair value to customers.
“These risks of harm could be exacerbated by the global economic uncertainties caused by coronavirus,” the FCA said in its business plan for 2020/2021.
“Over the next three years, we will develop an approach with measurements and metrics to assess fair value for consumers, using our ongoing evaluation of our previous intervention,” the watchdog said.
Payments services firms have been growing fast and the FCA said it was concerned that the coronavirus emergency will affect their financial strength and consumer’s ability to access cash.
The distribution of investment products was not working well enough for consumers to make effective decisions about what to do with their money.
“An area where we have seen increasing consumer harm is retail investments,” the FCA said.
“We remain concerned that consumers may be getting unaffordable credit, allowing firms to benefit from exploitative fees and charges,” it said.
It proposed launching a five-year campaign to publicise how consumers can avoid scams, the costs recovered from fees on the firms it regulates.
“This response to COVID-19 could prove a useful blueprint for being more proactive, pragmatic, outcome-focused as a regulator,” said David Miller, a partner at consultants KPMG.
The FCA has reviewed pay practices in the wholesale broker sector.
“We also expect to introduce a more risk-sensitive prudential regime for investment firms in 2021,” it added.
In its 2020/2021 business plan the FCA set a 587.6 million pounds ($725 million) for the coming financial year, up 5.2% on the previous year, but fees paid by 71% of the smallest firms will be frozen, while others will have until the end of 2020 to pay.
With the full impact of the epidemic unknown, the watchdog said its business plan may need to be re-written as swathes of policy work have already been delayed.
“In a matter of weeks, coronavirus has altered the UK’s financial landscape dramatically,” the FCA’s interim chief executive, Christopher Woolard, said in a statement.
($1 = 0.8105 pounds)
(Reporting by Huw Jones; Editing by Susan Fenton)
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