Complaints received by the Financial Ombudsman Service will be the catalyst for the Financial Conduct Authority to use its new intervention power, the Consulting Consortium said.
One of the new powers that the FCA has is intervening earlier than predecessor the Financial Services Authority could, in a bid to prevent widespread harm to consumers from happening in the first place, rather than just clearing up after the event.
In an interview with FTAdviser, Rebecca Prestage, head of policy at the Consulting Consortium, said complaints will be the catalyst for using this new power.
She said: “If the Fos is noticing lots and lots of complaints in certain areas, then they [the FCA] will investigate.
“They can intervene without consultation, so if they are worried, they can just intervene and then they’ve got 12 months to consult and investigate further and then either at the end of 12 months, they could publish some guidance or rules on it, or stop something completely or ban something completely. It’s a bit of a safety net really.”
However, Ms Prestage said without the FCA putting rules in place, “firms will quickly go in an sell as they can while they can”.
She said: “So the fact they just go in and stop it is very useful. I don’t imagine it will be used every day but I think where they are really concerned, they will.”
The FCA said its Journey to the FCA paper: “If necessary, we will be ready to intervene directly by making product intervention rules to prevent harm to consumers – for example, by restricting the use of specified product features or the promotion of particular product types to some or all consumers.”
The other new power that the FCA has is to name and shame companies when it finds misleading ads.
The FCA’s Journey to the FCA paper said: “The use of this new power will be determined by the specific promotion and not used against the firm as a whole.
“It can be used on its own or before we take enforcement action against a firm.”
Ms Prestage said: “Naming and shaming is quite powerful and it will act as a deterrent within the industry as people will not want their names are up in lights.
“The power to intervene may have the most impact on consumers because they can go in and stop something happening straight away rather than what happened with the whole payment protection insurance stuff and watching the car crash while it happened.”