OFT Financial Services Plan
29/07/2009
The OFT has today published its Financial Services Plan, detailing its strategy for reacting to the currently changeable market conditions we face and clarifying its priorities for focus in the near to mid-term.
The final Plan does not travel far from the ideas initially outlined for formal consultation with the industry in April, but does pick up on a number of issues raised by respondents, including recognition that Government action may detract from competition, and concerns about the activities of claims management firms.
The OFT’s Financial Services Plan, published today, sets out how it will seek to address its two primary, over-arching goals.
The first objective outlined is a determination to act as an “advocate of choice and competition”. The OFT aims to make sure that short term decisions made in reaction to current pressures will not result in adverse longer term results for the industry - damage to competition could harm prospects for economic growth. This objective will be pursued by ensuring that:
- The competition perspective is always incorporated as new regulation is designed and implemented – particularly important in light of concerns about the substantial volume of regulatory change currently facing the industry
- Government’s interventions in the banking sector to support certain banks will not undermine competition long term, and that as public stakeholdings are reduced with an intention to returning to independent business models, this is done in the best way to maintain consumer benefit
The OFT further develops its understanding of the competitive pressures which apply in financial markets - which may be expected to generally strengthen the approach to this objective. In particular the OFT will work in conjunction with the planned new consumer education agency to evaluate how strongly consumers can influence competitive outcomes
The second objective expresses an intention “to promote fairness and responsibility” between the industry and consumers. John Fingleton, OFT Chief Executive, said:
“In credit, we will continue to tackle behaviour which harms consumers and work to ensure companies behave fairly, transparently and responsibly.”
The OFT see the idea of responsibility as extending beyond the ‘letter’ of legal obligations to the ‘spirit’ of duties. This objective covers a series of projects looking at different aspects of lending and borrowing, including:
- Irresponsible lending – draft guidance due to be issued for consultation soon, with publication early next year
- Claims management firms – guidance will be issued to clarify creditor obligations under sections 77 and 78 of the Consumer Credit Act this autumn amid “concerns that some claims management companies are misleading consumers about their rights”
- Debt collection – an update of the Debt Collection Guidance is anticipated for December
- Charging orders – The OFT mentions that their interim findings in this investigation show “potential problems” with “how some creditors use charging orders” with concerns about possible “unfair business practices”
- High cost credit – The review of this sector launched at the start of the month and is to provide interim findings by the end of the year
- Debt management guidance – A review of compliance is planned for the autumn
- Bank charges – Investigation is expected to be completed by the end of 2009, and ways to speed up the test case resolution are being explored
- The plan, which may be read in full here, will be updated under the OFT’s all-encompassing Annual Plan, with a review next year.
Callcredit welcomes many aspects of the OFT’s plan. In particular we believe it is vital that any potential that consumer-facing measures may be promoted for short-term gain are balanced by strong advocacy for competition. By acting to protect competition the OFT can ensure consumers retain access to the best products and services at the best prices in the longer term – and help the future growth of the economy.
We note with interest the OFT’s specific mention of the ‘spirit’ of responsibility. In these difficult times, paying real attention to customer needs is likely to pay dividends not only by satisfying the regulator but by creating a firm foundation for current and future customer relationships.
Many consumers will be encountering temporary financial problems through no fault of their own. By proactively engaging individuals when warning signs develop, lenders will have the opportunity to benefit in future from retention and loyalty. Meanwhile, firms who take advantage of capabilities now available in data and tools to truly understand their customers will also be best positioned to retain and develop the custom of the fortunate individuals set to weather the financial storm well.
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