Rob Sinclair, chief executive of the Association of Mortgage Intermediaries, expresses concern about the mood of recent market studies. He says: “We have always been concerned the FCA has not clearly articulated how it will apply the competition brief it was given.
“Is it the job of the regulator or the market itself to bring in better choice? I think the FCA should only intervene where there is clear consumer detriment.”
Changing behaviour
This line of thinking is not met with agreement from all comers. Consumer champion Mick McAteer is also worried the balance is not quite right between regulation and encouraging competition – but he would like to see greater, direct intervention rather than just expounding the benefits of competition and choice.
He says: “Our concern at the Financial Inclusion Centre is the FCA is now relying too much on promoting competition as the way to make markets work, particularly for vulnerable customers.”
He highlights the two ways that market behaviour can be changed:
- Demand-side/competition interventions – designed to try to encourage or arm consumers with information and skills to drive market behaviour, force providers to compete for business;
- Direct, supply-side regulatory interventions – aimed at changing firm/individual behaviours, determining what constitutes good behaviour; for example, tough conduct of business, price caps mandating fair treatment of vulnerable consumers, and so on.
The first has had some effect – for example, in the car insurance market, where intervention saw “fierce price competition”, in Mr McAteer’s words – but he adds that in some cases this also led to high excesses and concerns about claims-handling standards.
That can be contrasted with supply-side regulatory interventions, including imposing caps on charges in the payday lending market that brought about sweeping improvements.
Therefore, Mr McAteer believes the FCA’s perceived search for alternatives to direct regulation is “worrying”. He says: “Competition interventions, even if they stood a chance of working, just take a long time. History shows direct regulatory interventions, constraining market behaviour or forcing improvements, produce the greatest return, more quickly.”
But others feel the watchdog has so far struck the right balance, believing the impact of recent market studies to be positive, encouraging the industry to work together to promote better products, services, transparency and processes.
Mr Cameron says: “By improving disclosure in the platform market, as outlined in the recent market study, the FCA is intervening, but I see this more as it working to explore how to challenge providers and to protect consumers.
