Providers and distributors need to work together to treat customers fairly - says FSA
28th September 2006Providers and distributors of financial products have differing but interlocking responsibilities for treating customers fairly (TCF) and need to work together to help avoid potential future detriment for consumers, according to a discussion paper issued today by the Financial Services Authority.
In the paper, the FSA encourages providers to design their products with greater care, to provide higher quality information, to monitor distribution channels more effectively at a high level, and to undertake better post-sale analysis of the performance of products.
The FSA also encourages the distributors to scrutinise more closely information they receive from product providers to ensure specific products are suitable for specific consumers. This should result in fewer cases of unfair outcomes for consumers for example where a distributor believes on the basis of information from a provider that a product is suitable for a customer.
The paper is designed to help providers and distributors understand their respective responsibilities to consumers and help improve cohesion, confidence and efficiency in the combined distribution effort. It provides the FSA view of what the existing Principles for Business mean in a practical sense and does not include new rules.
FSA Chief Executive John Tiner said:
"Today's paper is an important element of the Treating Customers Fairly initiative. It is designed to help ensure outcomes for consumers are fair regardless of the route by which they have received a financial product or whether it was provided and distributed by a single institution or by two or more.
I should emphasise that we are not placing new regulatory responsibilities on either providers or distributors. Nor are we looking for providers to 'police' their distribution channels or for distributors to transfer current responsibilities to providers.
We know some firms are doing this already but we do expect providers and distributors to work together to ensure that consumers are dealt with in an effective and fair way. Providers should give more support and information to distributors of their products with a corresponding expectation that distributors should use product information effectively with consumers."
Firms treating their customers fairly is a key element of the FSA's aim to make the retail financial services markets work more effectively and is a core component of its move towards more principles-based regulation. The FSA sees the kind of paper published today as a way of communicating with firms about its views on the practical implications for business practices in the context of high level principles and rules.
The deadline for feedback from industry is 29 December
