Stop Re-writing the Rules

The announcement by the Financial Services Authority (FSA) that from the start of this month it has taken over the regulation of the way banks treat their customers is not new.

Since 2006, the FSA has been urging banks and building societies to ‘Treat Customers Fairly’ (TCF), developing a principles-based regulatory agenda designed to help consumers achieve a fair deal*. By 31 December 2008, banks, building societies and financial service providers were expected to demonstrate to the FSA that they were consistently treating their customers fairly. Yet although this system of regulation was supposedly in place, complaints about the way banks, building societies and specialist lenders treat their mortgage customers have soared by 40 per cent in the last six months.

The government has even gone over the FSA’s head by proposing that unfair credit card terms be outlawed stating that it is not acceptable for credit card companies to impose complex and confusing terms and conditions that leave consumers baffled.

What the FSA needs is not a new rule but a commitment to regulate and audit financial service providers to ensure that customers really are treated fairly. Regulation can only be effective if rigorous tests of fairness are carried out. Independent audits must be central to this process of testing. This should include mystery shoppers and customer surveys as well as an audit of marketing materials, consumer information and a thorough review of policies and practices. Without intelligent and independent scrutiny, banks will carry on trying to wriggle out of their duty to treat the customer fairly.

How banks treat customers is under the spotlight as never before, but unless the regulators insist on independent checks, consumers will continue to be treated unfairly.