RegulationFeb 22 2019

Consumer panel's Lewis on unfinished business

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Consumer panel's Lewis on unfinished business

The former chairman of the Financial Services Consumer Panel has praised the industry's progress over the past five years but warned more needed to be done to make financial services work better for consumers.

Sue Lewis, who left the FSCP at the end of last year after five and a half years at its helm, praised the industry's work on implementing a duty of care in recent years, saying the panel had achieved a noticeable shift in encouraging the Financial Conduct Authority and the wider industry to address this issue.

She said: "Getting a duty of care onto the agenda was hugely important, consulting to expose some of the issues which we described as legal, but not fair."

Ms Lewis said an example of firms adhering to the rules, but still not implementing fair practice, was the loyalty penalty levied by firms, which meant long-standing customers were getting a worse deal than new ones.

Last year the FCA found the loyalty penalty was "entrenched" in the retail banking market and affecting mortgage clients. It pledged to address the issue.

Ms Lewis said: "The debate has really shifted towards questioning the loyalty penalty and the FCA is now looking in particular looking at fair pricing in the insurance market."

She added: "The idea of a duty of care should put the onus on firms to make sure treatment is fair for everyone at the outset of a service, and not just paying out at the end when a consumer has sought redress.

"Getting those sort of debates on the agenda was really important."

But Ms Lewis said an area the panel and the FCA had yet to address sufficiently was the issue of providing financial guidance to consumers, especially those who could not justify the cost of advice.

She said: "In pensions especially, there are still not enough consumers making use of guidance services such as Pension Wise.

"Where people have been auto-enrolled, they suddenly have to make a whole bunch of decisions they are not properly equipped to make."

Ms Lewis said it could be tempting for those with defined benefit pensions to transfer to access cash, but warned that "so much more" must be done to help consumers in this situation make good decisions.

She said: "Driving people towards accessing pension guidance and to have those discussions is still a big gap, especially when advice is not feasible for those with smaller pensions pots and investments." 

Ms Lewis said she would like to see the Single Financial Guidance Body and Pension Wise strengthened and supported financially.  

She said: "I don’t think firms can give impartial guidance to consumers, instead it should come from a publicly funded source." 

In 2016 Ms Lewis strongly criticised the boundary between the regulatory and common definition of "advice", claiming whether a service constitutes regulated advice was crucially important in ensuring consumers made well-informed decisions.

She said this allowed automated services offered online, such as some price comparison websites, "to masquerade as advice providers" without having any liability for the decisions taken by the customer on the back of their recommendation.

Ms Lewis said she was proud of what the panel had achieved during her time there, with particular reference to the body's work on vulnerable clients and transparency of costs and charges, but admitted it had "struggled" in some areas such as credit cards and overdrafts.

She said: "Despite all the work the FCA has done in this area, firms are still shoving credit at people and affordability really needs more work. 

"Firms still need to work on checking people can afford what they are being offered."

Since leaving the FSCP Ms Lewis has been kept busy with various charitable roles, including her position as trustee director at The People's Pension and as a trustee of StepChange Debt Charity, but said she sees another consumer-led role in financial services in her future. 

The Financial Conduct Authority on Wednesday (February 20) announced Wanda Goldwag has her successor.

rachel.addison@ft.com