Ensuring Fair Play In Financial Services


In the United Kingdom, there are a number of bodies who seek to regulate different parts of the financial services industry. Here we look at the role of some of the main bodies, and how they seek to maintain standards and protect consumers.

Financial Services Authority (FSA)

The most important financial regulator, the FSA has four key objectives: maintaining confidence in the financial system, maintaining the financial stability of the system, protecting consumers and reducing financial crime. All firms engaging in areas regulated by the FSA must obtain prior authorisation to do so.

The FSA regulates a huge range of financial services. It attempts to ensure firms are sufficiently solvent, an area which has attracted a considerable amount of publicity for the banking sector. The FSA also has a detailed set of rules and principles that firms must follow when giving financial advice or conducting other activities, and it has the power to fine companies and individuals, or even to withdraw their authorisation, should they fail to comply.

While the FSA regulates most UK financial services, consumer and business loans (other than residential mortgages) do not fall under their jurisdiction.


Office of Fair Trading (OFT)

The OFT promotes compliance with business law by a wide range of different companies. In the financial services sector, the OFT’s main responsibility is to ensure that firms engaged in consumer credit activities follow the requirements of the Consumer Credit Act and other relevant legislation.

The OFT requires all firms involved in consumer credit to hold a Consumer Credit Licence, which are issued by the OFT. The OFT can revoke a licence if it has evidence of improper practice on the part of the firm.

Financial Ombudsman Service (FOS)

The FOS is not a regulator in the sense that it does not prescribe rules, but it provides a vital moderating service on the activities of financial firms.

Customers with grievances against a financial institution should first complain to the firm in question, who should fully and fairly investigate the matter. But customers who disagree with the firm’s assessment of the complaint can refer the matter to the FOS.

The FOS can adjudicate on complaints where the customer alleges financial loss or material inconvenience, and where the complaint concerns an activity regulated either by the FSA or OFT. The FOS will conduct its own independent investigation into the complaint, and where it finds in favour of the complainant, it can issue a legally binding instruction to the firm to offer appropriate redress. When assessing complaints, the key thing the FOS consider is whether the customer has been treated fairly, a key principle of the FSA.

Financial Services Compensation Scheme (FSCS)

Like the FOS, this body is not strictly speaking a regulator. The FSCS can provide compensation to customers of financial firms which have become insolvent or ceased trading.

The FSCS may be able to help if you have a complaint against a company that has ceased trading, or if you have lost money via a company you have invested with becoming insolvent.

National Association of Commercial Finance Brokers (NACFB)

Lending to companies is not regulated by the FSA, and the FOS will not usually adjudicate on complaints relating to business lending. The NACFB is a trade association for commercial finance brokers, however one of its key roles is to promote good practice in the commercial lending sector. The NACFB has its own Code of Practice for members to follow. It is not compulsory for commercial lenders to join the NACFB, and hence be subject to the Code, but clearly businesses using an NACFB member broker have a higher degree of protection than those using a non-member.

The NACFB provides training to member firms on good practice issues, and operates its own disciplinary and complaints procedures, with the power to suspend or terminate the membership of any broker who does not comply.

Lending Standards Board (LSB)

The LSB oversees compliance with the Lending Code, which specifies good practice standards regarding loans, overdrafts and credit cards. Sanctions available to the LSB include instructing firms to carry out remedial action, and suspending firms’ registration under the Code.

Remember though that your most powerful protection comes from you. If you are not getting the kind of financial services, then leave and take you money with you. Switch bank account if your current provider is letting you down, and let others know why you did so that they can avoid the same mistake.


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