Building Societies Association
Feature
Deregulation - the real thing this time?
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Contact: Chris Lawrenson Date: 31 Jul 2008 |
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Some of us will remember Michael Heseltine’s ‘bonfire of red tape’ exercise and John Major’s ‘deregulation’ initiative in the 1990s, and the present Government has expounded the cause of deregulation throughout the 2000s. Yet the regulations keep piling up. Take laws designed to ensure that consumers are treated fairly: all of the following fair play mechanisms - legal, regulatory or code of practice - currently apply to the ‘unregulated’ product area of savings and banking -
- The FSA’s Fairness Principles and Treating Customers Fairly
- Consumer Protection Regulations 2008
- The Banking Code
- The Advertising Code
- Financial Services (Distance Marketing Regulations) 2004
- Unfair Terms in Consumer Contract Regulations 1999
- Regulatory or industry guidance on the above provisions
- Misrepresentation Act 1967
- Unfair Contract Terms Act 1977
- Common law penalties/liquidated damages and various other common law provisions
- FSA Dispute Rules
- The Financial Ombudsman Service
There are many overlaps and duplications among these measures, and the list above doesn’t include data protection, anti-discrimination laws and many other provisions that no doubt have a significant fairness element. The latest initiative with a strong deregulatory flavour is the Department of Business Enterprise and Regulatory Reform’s consultation Consumer Law – call for evidence, the deadline for responses to which was 31 July 2008. A wide-ranging consultation, it notes that –
“We have one of the best systems of consumer protection in the world, but our legislation has accumulated over decades and is complex and inflexible”.
The Association agrees. Building societies are committed to fair treatment of their members and are concerned that the range of fair play mechanisms in relation to deposit-taking and mortgages in the UK is badly in need of simplification and streamlining. The complexity and inflexibility of the current mechanisms have created a regime that is detrimental to both businesses and consumers because it leads to -
- Sub-optimal outcomes for consumers – how can consumers know their rights when those rights are embodied in an excessively complicated series of, often overlapping, laws, regulation and codes?
- Unnecessary burdens for business – the Business Minister stated that the complexity of consumer law “makes it hard to understand and costs business an estimated £1.25 billion every year”. These costs will ultimately be passed on to consumers. It should be borne in mind that the direct, assessable costs are only part of the picture when it comes to compliance.
The consultation paper, among other things, acknowledges that the Government must do more to tackle the complexity, cost, fragmentation and inflexibility of current legislation. But will the responses to the consultation simply gather dust, or will we at last go beyond words and get to nub of the problem?
The BSA’s response sets out a 12-point plan for improving the position, within the constraints imposed by EU law. The BSA's main proposals are –
- No more' gold-plating' of EU Directives - The UK should work to ensure EU law is sensible and proportionate and then follow it, rather than 'gold-plate' it. Prospective UK legislation should be put on ice if relevant EU laws are on the horizon and, once EU laws are implemented, existing laws covering similar ground should be abolished.
- Draw the line on excessive, complicated law-making - Consumer laws should be simplified and harmonised wherever possible. But the onus must now be on the regulators to enforce consumer laws against rogue traders engaged in sharp practice. There should be no more 'knee-jerk' law-making in response to a problem - there are more than enough consumer laws, but they need to be enforced against those who treat customers unfairly.
- Regulatory simplification - law-makers and regulators should take a joined-up approach when dealing with fairness, and the Government should investigate whether the FSA can truly be made the UK's 'single' financial services regulator by taking over responsibilities for enforcement of consumer credit laws.
- Rights and responsibilities - It is time for a definitive statement of the respective rights and responsibilities of firms and consumers. Little has been done regarding consumers' responsibilities - but the public are entitled to be clear about their responsibilities as well as their rights.
It is time to end mere lip service to deregulation and, in the consumer interest and Britain’s economic interest, start sorting out the complicated UK consumer protection rules.
