FSA to explore issue of consumer responsibility

The Financial Services Authority (FSA) has launched a discussion paper on consumer responsibility to explore what steps the regulator or others could take to help consumers understand and protect their own best interests more effectively.

The protection of consumers is one of the FSA's four statutory objectives, and the regulator adopts a two-pronged approach to achieving its consumer protection and consumer awareness objectives:

it sets, monitors and enforces standards for firms; and
provides - or require others to provide - education, information and advice for consumers.

While the FSA has no power to impose responsibilities on consumers, it is required by law to consider the general principle that consumers should take responsibility for their decisions when setting its consumer protection agenda. To this end, the discussion paper aims to provoke debate and bring greater clarity to the FSA's approach to consumer responsibility.

Dan Waters, FSA director of retail policy & conduct risk, said: "Responsible and well managed firms that treat their customers fairly are crucial. Indeed, to this end, the FSA is strengthening its supervision of firms through the Supervision Enhancement Programme and its Enhanced Strategy for Small Firms. All firms have been warned that they face stronger and more intrusive regulation to ensure they are aware of their responsibilities to treat customers fairly.

"However, we also believe that markets will work more effectively if consumers are more involved, more capable and empowered. While we do not regulate consumers, we believe that we can work with firms, industry bodies and other stakeholders to encourage and enable consumers to consider their own interests more effectively in their decision making.

"We acknowledge that this is a debate that elicits strong feelings on both sides and we are keen to try to find common ground in order to contribute to better understanding and better outcomes for consumers in financial services markets."

The FSA believes that many of the positive outcomes of this work - such as greater engagement, better decision making by more capable consumers, a reduction in complaints and greater understanding around what happens when things do go wrong - may be realised only over the longer term.

However, in the shorter term the regulator hopes to reach a greater consensus among stakeholders as to the nature of consumer responsibilities and the sensible actions that consumers should take when engaging with the financial services industry.