Regulator cracks down on comparison websites

Price comparison websites that promote one mortgage product over another will need to be regulated, according to the Financial Services Authority.

Last week the regulator wrote to firms operating comparison sites informing them of what does and does not class as regulated advice.

It reviewed the practices of 19 comparison sites offering financial products and says many have designed their systems and controls to maximise revenue and have not paid sufficient regard to regulatory compliance.

The FSA says many of the firms it reviewed did not hold the appropriate permissions to carry out the service they offer.

It gave a number of examples of when a site is offering advice, such as displaying the name or logo of one product that suggests it is to be preferred over other products.

The regulator also says consumers may be being misled about the services they are receiving.

Based on claims by the sites consumers may believe they are receiving a quote based on their individual needs when they are actually receiving an illustrative quote on generic risk criteria.

Mark Lofthouse, chief executive officer of Mortgage Brain, would welcome some form of regulation of the sites.

He says: “Comparison sites offer a variety of services. Some provide information only while others provide referrals to brokers. It seems reasonable that there should be some guidelines for them at least, if not full FSA regulation.”

The FSA has asked all comparison sites to consider whether they are establishing, implementing and maintaining adequate polices in relation to the services they offer.

They have until August 8 to give feedback to the regulator.