Which? plans to lobby for more market reform

Consumer group Which? is to lobby the Financial Services Authority regarding reforms intended to restore confidence and trust in the financial services industry.

In response to mis-selling scandals, the Which? consultation paper, Time for a Change, recommends a code of fairness to transform the consumer relationship.

The aim is to place greater emphasis on a cooperative approach to encourage consumer awareness.

Measures include the amendment of selling practices, with a move away from the commission-based culture, stress testing of products to gauge market risk and consumer understanding, and the disclosure of company complaints records.

John Cox, spokesman for Which?, says: “There has been a downturn in the take-up of financial products due to mistrust. This consultation is a way of working with the industry in order to demonstrate how to treat consumers”.

Rather than placing blame, consumer interest is the name of the game, says Which? – a line the FSA is likely to approve.

David Whitely, spokesman for the FSA, says: “When the FSA determines a financial penalty it takes into account issues including the seriousness of the misconduct and the nature of the breach; whether the breach was deliberate or reckless; the loss or risk caused to consumers; how long the breach went on for; and the ability of the company to pay the fine.

“Whether the misconduct brought the industry into disrepute is also a consideration.”

But enforcement is always the FSA’s last resort and a company’s willingness to cooperate with the regulator is important.

Whitely adds: “It’s often possible to negotiate a settlement.The FSA aims to make sure consumers don’t lose out. A company found in breach may have to meet the cost of mitigating consumer loss over and above an initial fine.”