Sam Dunn: Great financial ideas - a queue is forming
Sunday 16 July 2006
That old saw about buses, an age waiting and then three pulling up at once, was at work last week.
Waiting next to me at a local bus stop were a couple of lads (not hoodies) who grew greatly agitated as our bus failed to materialise. When, after at least 20 minutes, three rolled up at once, they were only too eager to lambast the driver.
Although their language was a tad industrial, I did share their sense of desperate joy that - having been short of resources - we now had a surfeit.
The same principle has also been at work in the financial services industry. After a prolonged spell of the usual doom and gloom, three startlingly good ideas emerged in the same week.
The first came from the Social Market Foundation and concerns the equity-release market, where pensioners free some of the cash tied up in their home either by selling part of it or taking out a loan secured on it. The think-tank wants the Government to step in and help create a new equity-release product for those on lower incomes.
Its proposed "Homesaver" plan would be shorn of the complexity that currently surrounds equity release. It would be sold by specially trained advisers and suitable for those who wouldn't normally qualify for such schemes.
The foundation also calls for greater transparency in the selling of the plans; more "mystery" shopping exercises by the Financial Services Authority (FSA) to catch out the bad apples; and heavier fines for those firms that break the rules.
Next up, a plea from the Financial Services Consumer Panel (FSCP), a consumer-protection body funded by the FSA. It's keen for the City regulator to police adverts for financial products more tightly, after research into newspaper ads unearthed "worrying levels of rule breaches".
One Saturday in February this year, it reviewed 220 financial promotions and found that 57 per cent did not comply with FSA rules. The worst offenders were ads for insurance products such as car cover - which featured confusing abbreviations and illegible small print - followed by mortgage ads and investment promotions.
Other cases of non-compliance with rules included loan ads for consumers with a poor credit rating, which didn't advertise the interest rate, and mortgage ads that didn't devote enough space to the consequences of failing to make repayments.
Financial promotions are not strictly covered by the rules of the Advertising Standards Authority (ASA) - a "quirk of the set-up", according to the FSCP's chairman, John Howard. As a result, errant companies won't be named and shamed unless full enforcement procedures are enacted by the FSA. In the case of most other industries, by contrast, the ASA is happy to publish details of any alleged infringement, no matter how minor.
Mr Howard - rightly, in my view - wants the City regulator to adopt the ASA's practice to encourage better behaviour in the financial services sector.
The final bright idea, from the National Consumer Council (NCC), is probably the best of all for consumers: a telephone and internet-based "one-stop" shop for anyone falling victim to ID theft. Today, it's up to the individuals who are targeted to pick up the pieces, working with the police and with often hostile banks to prove their innocence. The NCC wants banks and businesses to pay for its proposed service.
It has floated this great idea before and got no- where, but it says new research shows more people are suffering, reinforcing the need for a central help point.
It's no surprise that not one of these proposals was dreamt up by a financial services company. As always, the path to higher standards for all comes from pressure applied from outside.
This is an industry renowned for creating products that make a lot of money, and it would be wonderful to see some of this creativity redirected towards better consumer care. Hopefully, like the buses, it will arrive. And sooner rather than later.
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