FSA must tell customers what it knows
Hooray for the Information Commissioner. He’s the chap who stands up for our rights under the Freedom of Information Act when a public body refuses to tell us things. In a landmark ruling he has ordered the Financial Services Authority to publish details of firms who could have mis-sold products to elderly customers who wanted to raise some cash by taking out a loan on their home.
The FSA discovered the problems during a ‘mystery shopping’ exercise in 2004. It found that seven out of ten advisers were not gathering sufficient information and six out of ten did not tell customers about the downside of these so-called equity release products. It also criticised some advisors for encouraging people to borrow more than they needed and then persuading them to buy investment products with the surplus.
Despite these findings the FSA refused to name the firms which had given what Managing Director Clive Briault called "poor quality advice". Now it will have to do so, along with its own assessment of them.
One of the FSA’s four duties under the law is "the protection of consumers". But it has justified keeping secret the names of the companies where brokers and advisors gave unsatisfactory advice in case revealing them damaged the businesses concerned. That meant the FSA’s own staff knew the identity of companies which did not treat their customers fairly but the public, whom they are supposed to protect, was left in ignorance and open to potential mis-selling.
But the Information Commissioner ruled that the public’s right to know is more important than the potential damage to the companies that had given the poor advice. In his judgement Assistant Commissioner Steve Wood said that revealing the information would "encourage firms to remedy problems quickly in the interests of customers." He also said he had "considered the strong public interest in enhancing the transparency in the financial services industry which would improve public confidence in it."
The ruling could be used in future to force the FSA to reveal the names of firms selling other products, such as mortgage endowments and payment protection insurance, where its research has also revealed failings in the sales process.
I am particularly pleased about the ruling because it was me who asked the FSA for this information more than two years ago. The FSA could still appeal to the Information Tribunal. But if it does not do that by September 4th it will have to reveal the details by September 11th. Fingers crossed.
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