FSA issues warning on comparison websites
The FSA has started to crack down on price comparison websites because of concerns that lower-earning financial consumers are not being treated fairly.
The City watchdog has written to firms operating the websites, urging them to make sure they are compliant with regulation and offering guidance to new entrants.
In the letter, the FSA warned that firms could be inadvertently giving regulated financial advice without holding the correct permissions, and that they must clarify whether they are introducing, arranging or advising customers on buying insurance.
The letter follows a review carried out by the regulator between June and September 2010. Firms have until 8 August 2011 to respond to the proposed guidance.
The FSA said price comparison websites should take responsibility for checking eligibility or disclosure, rather than putting the onus on the customer.
It said firms that use comparison tools of third-party providers must must make it clear to customers which firm they are actually dealing with and who to contact with a complaint. They should also check that the provider holds the correct permissions.
In its guidance on treating customers fairly, which came into effect in December 2008, the FSA said: "Firms must be able to demonstrate that they are consistently delivering fair outcomes to consumers."
Dominic Basilea, financial planner for Hertfordshire-based KDW Associates, said: "Competition is good and these types of websites create competition, but I do not believe they offer fair competition because many just offer the best possible deals which are not necessarily what the client may qualify for.
"Websites have to be clear about what they are doing, whether they are providing information and knowledge, which is good, or whether they are giving advice. They should not be giving full advice."