Welsh Tenants Federation response to the Financial Services Bill

The Government brought its Financial Services Bill before parliament today (19th Nov 09). Among the bills provision is the ability of representative bodies to bring actions on behalf of consumers thus ensuring that consumers can obtain redress through the courts. It also strengthens the role of the Regulator the Financial Services Authority, (FSA) by extending its powers thus enabling it to act more proactively on behalf of consumers.
The Welsh Tenants Federation welcomes provisions to ensure added safeguards for consumers whilst providing better information, education, and redress for consumers of financial products. In particular we welcome the setting up of a national Money Guidance Service paid for through a levy imposed on financial institutions. This will enable people to receive better advice and support and help people to develop their knowledge and understanding of financial products and services.
While the Bill has made provisions to ban the open cheques used by the sector to entice people to borrow, the bill falls short of capping the often excessive charges for credit as proposed by many national consumer representative bodies.
Steve Clarke policy officer for the WTF said, “while there are some good measures contained in the bill, particularly the provision of better independent advice, the government has failed to protect private tenants from eviction where their landlords property is being repossessed for mortgage arrears. The reliance on the voluntary protocol established earlier this year between the Council of Mortgage Lenders and government does not go far enough in helping tenants to safeguard their home and is a temporary measure. This is a missed opportunity to provide assurances to people who rent privately, the government could have ensured that lenders have a duty to consult on a range of options such as: consulting housing associations who would have an option to convert the mortgage to a rental scheme with better security of tenure for the occupants; consider a mortgage rescue scheme with the landlord; or extending the payback period of the mortgage”.

Some of the main headline elements of the bill include:
New measures to provide better support for consumers including:
•Allowing a representative organisation to bring action through the courts on behalf of a group of consumers.
•Enhancing the FSA's powers to enable it to order a review of past business and secure compensation if there has been legal or regulatory breaches.
•A ban on open credit card cheques, preventing financial institutions from encouraging customers to borrow more than they can afford.
•A new independent Money Guidance Service established by the FSA, to increase financial education and awareness among consumers.
•New authority for the Financial Services Compensation Scheme to act as an agent to deliver compensation to UK customers of financial firms based overseas, improving depositor protection.

Financial stability
•Strengthen the regulatory framework, including the creation of the Council for Financial Stability (CFS) and enhanced powers for the Financial Services Authority. The CFS will be chaired by the chancellor of the exchequer and include the chairman of the Financial Services Authority (FSA) and the governor of the Bank of England, to focus on managing systemic risk and protecting financial stability, both in the UK and internationally.
•A new FSA duty to require firms to produce Recovery and Resolution Plans (RRPs). RRPs will ensure institutions have robust recovery plans to deal with periods of downturn relieving reliance of support from the taxpayers.

New powers given to the FSA are as follows:
•Rule-making powers may be used by the FSA for any of its objectives (not just consumer protection as at present).
•Information-gathering powers extended to non-regulated firms where information is relevant to financial stability, for example hedge funds.
•Strengthened powers to take action where firms and individuals are guilty of misconduct.
•Legislative provisions on pay as recommended by the Walker review of corporate governance (due for publication 26th November) and the G20 agreement on remuneration. This includes:
oTougher rules on pay and bonuses to ensure remuneration policies do not contribute to excessive risk taking.
oAn end to multi-year guaranteed bonuses, or large bonuses paid out as a cash lump sum at the year-end, and all bonuses subject to clawback;

The Welsh Tenants Federation will monitor the passage of the Bill through its various stages in parliament. Time is however short, we are hopeful that the gaps in the bill can be addressed as it progresses.
The Welsh Tenants Federation is the representative voice for tenants in Wales. For further information contact news@welshtenantsfed.org.uk