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FSA gets tough on mortgage mis-selling

Friday, March 12, 2010

Source: Catherine Deshayes

The head of the Financial Services Authority is to announce plans for the regulator to toughen up protection for consumers over financial products, including mortgages.

Hector Sants will say the FSA needs to stop risky products being sold, rather than just pay out compensation when the damage has already been done. Investors have been hit by a number of mis-selling scandals in recent years. The Conservatives want to scrap the FSA and hand some of its powers to the Bank of England if it wins the election.

However, the BBC's business correspondent Nils Blythe says that the FSA's proposals are likely to implemented whatever the structure of regulation in the UK.

Preventative action

Last month, Mr Sants announced that he would step down as head of the FSA this summer. Before he goes, he is keen to push proposals through that give consumers better protection when buying mortgages, pensions and investment products.

In doing so, he hopes to restore public trust in the financial services industry after mis-selling scandals including personal pensions, endowment policies, split capital investment trusts and payment protection insurance, some of which predate the FSA.

Mr Sants told the BBC that the FSA should have stepped in earlier to prevent mis-selling in the past. He said the regulator must now vet risky products before they go on sale to the public. "[We need to] analyse more comprehensively what individual firms are up to, and get more involved in the design stage [of financial product development]".

He added, however, that the FSA would not be "pre-approving" every product on the market, as there were simply too many of them. On the Conservative plans to break up the FSA, Mr Sants said staff would be "unsettled" by the organisational change, but stressed that the policies rather than the structure were more important.

He said the regulator had become far more effective over the past two years and that the same people would continue to make the important decisions, no matter what the structural changes.

Source: www.bbc.co.uk