FSA steps away from product price caps but will probe 'value'

The FSA has stressed its preference for product intervention as an “essential” means of achieving consumer protection.

Product governance is central to the regulator's plans to achieve better consumer outcomes across the whole value chain, the FSA said today in a product intervention feedback statement.

"This includes looking at product governance, how products are brought to the market and managed over their lifetime, and taking earlier action where we foresee the possibility of detriment," the paper states.

The FSA ruled out price-capping all products. However, in some cases it said it might be appropriate to impose limits on excessive charges to solve competition problems.

Such measures would be used only when appropriate and where there is clear evidence of risk to consumers, the FSA said.

The FSA admitted there are a "number or risks" to greater and earlier product intervention including unintended consequences, disproportionate costs and regulatory failure.

Consumer groups were broadly in support of the earlier intervention plans, it said.

However industry reaction has been more mixed with some respondents arguing at the point-of-sale is where consumer detriment originates.

"The point-of-sale is a critical part of the value chain and is a key determining factor in whether consumer detriment will arise," the FSA said.

"However, we consider that product design and decisions made by product designers about how - and to whom - products will be distributed play a significant role in determining consumer outcomes."

The proposals are part of the regulator's early-intervention drive as it looks to spot emerging risks before they materialise.

"Our aim is to act earlier than we have in the past to prevent what detriment we can and be more active in securing redress where things still go wrong."

Currently, the FSA's approach is to accept most retail financial products are suitable for some customers and that it should not, therefore, intervene in their design.

The FSA said it has already revised this stance "to anticipate consumer detriment where possible".

Elsewhere in today's paper the FSA said it expects some of its TCF guidelines to become rules.

"We expect to turn some of the TCF guidance particularly the responsibilities of providers and distributors for the fair treatment of customers into rules," it said.

The regulator also repeated a previous belief that its replacement, the Financial Conduct Authority, should have a lower risk tolerance than the FSA in order to minimise consumer detriment.