RegulationSep 2 2014

Watchdog contemplates giving you a star rating

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The Financial Services Consumer Panel is considering whether a “star system” for firms’ bad behaviour such as upheld complaints and fines would impact consumer choices, as part of a new project.

The project will attempt to ascertain whether a system which displays attributions to firms, such as complaints and various transgressions of Financial Conduct Authority rules, would have an effect on consumer choices.

The panel is developing this theme through focus groups in October and November.

Sue Lewis, chair of the FSCP, said that the panel expects this project to be completed early next year. Speaking to FTAdviser, she said: “We have got three projects on the go this year.

“This year we are looking at investment costs, we are looking at cross subsidisation in personal and current accounts and then we are looking at something slightly more abstract, which is on whether information about firms behaving badly has or could have an impact on consumer behaviour in terms of which firms they use and whether they switch.

“If you have a sort of star system made up of things like complaints the firm has had that have been upheld, fines the firm has had, various transgressions of FCA rules, and if you reduced that to something consumers would understand – would they actually use that and would they move firms when they were looking into buying a new product? Would they use that information?”

Ms Lewis said that research has been carried out and the theme is being developed along the lines of the red, amber, green labelling displayed on processed food products.

She said: “We’ve done a little bit of quantitative research but now we want to do some focus groups and dig in a little bit more depth.”

In the investment costs arena, the FSCP has already done research comprising of an analysis of market and a literature research, both of which are now “substantively complete”.

Ms Lewis explained: “We have to do quite a bit of thinking about how we want to use that work, what messages we want to put out and what we think should happen next. So we will bring out [the] two pieces of work and then bring out a discussion paper. We expect the discussion paper to be out in October.”

Possible outcomes of the investment costs piece might be to provide consumers with more of a voice, she said, or for them to get a better understanding of what the costs actually are.

“Especially now in the new pensions environment a lot of people depend on investment products, the cost of investment can take quite a slice out of the money you end up with of course.”