Banks to pay for education of consumers
BANKS will have to fund a drive to improve consumers’ understanding of financial products, under proposals to be revealed today in chancellor Alistair Darling’s white paper on financial regulation.
The Treasury believes a lack of sufficient education on finance contributed to the credit crunch and will tell the Financial Services Authority (FSA) to increase dramatically the amount it levies on banks, to pay for a new national advice service.
The FSA has already piloted a scheme in the North, which offers consumers advice on which financial products to choose. That scheme is now set to be rolled out across the UK, with the banks picking up the bill.
The increased burden on the FSA could also see the City watchdog’s funding hiked to help it cope with the added responsibility of educating British consumers.
Darling will also announce a new system of warnings to consumers about the fine print in contracts governing financial products. The system, similar to warnings displayed on cigarette packets, would alert consumers to pitfalls in the products they buy.
The Treasury’s efforts to improve financial institutions’ relationship with consumers will see banks told to speed up efforts to resolve the 1m outstanding complaints about overdraft charges.
Banks are fighting a case in the House of Lords to determine whether the Office of Fair Trading can rule on whether overdraft charges are fair.
But the Treasury wants lenders to consider in the meantime how to resolve complaints more quickly, to ensure customers are not left waiting to see if they can reclaim funds.
The chancellor’s measures to protect consumers will accompany a raft of measures, revealed by Morning Wire on Monday, designed to reduce risk in the financial system.
These will include caps on leverage, as well as higher capital and liquidity requirements for banks which are deemed risky. The paper will also outline measures to force banks to write “living wills” so that they can be easily carved up if they fail.