FCA chief debates vulnerable customers vs caveat emptor

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FCA chief executive Andrew Bailey says the regulator’s role is to protect vulnerable consumers while striking a balance with individual responsibility.

Yesterday the regulator launched its ‘mission’ consultation, a set of principles that will inform the regulator’s strategy and day-to-day work.

Speaking at Mansion House last night, Bailey said the regulator is “more on the side of protecting the vulnerable”, and argued whether the regulator should give those customers more attention than others.

He said the regulator has to adhere to the principle that customers must take responsibility for their own actions, but it must also take into account the different levels of experience and expertise customers might have.

Bailey said: “But, if we do give more attention to more vulnerable consumers, the question becomes ‘how do we define vulnerability, bearing in mind that a very large part of the population will be vulnerable at one or more times in their lives?’ We set out our thinking on this in the future mission.

“To give away the ending, we are more on the side of protecting the vulnerable, but recognise the definitional challenge. I remember a time when this question would lead to a lot of agonising over moral hazard. It gets easier when we recognise that vulnerability can create very different financial outcomes for individuals depending on the products they need.”

Separately, Bailey argued the language around enforcement can have unnecessarily negative connotations.

He said: “For enforcement, there is a quite common saying that ‘x is in enforcement’ – to which guilt and punishment will surely follow. We don’t believe it should be seen like this.

“A referral for investigation is just that, and no more; the beginning of a forensic process of investigation to determine what happened and whether enforcement proceedings should be brought or not.”