HISTORIC PRESS RELEASE : Consumer and Industry to benefit from changes to Banking, Mortgage and General Insurance Regime [December 2001]

The press release issued by HM Treasury on 12 December 2001.

A better deal for consumers across a range of financial services together with a streamlining of regulation which will benefit business was announced today by Economic Secretary Ruth Kelly.

She set out the good progress made by the banks in implementing the recommendations of DeAnne Julius’s Review Group aimed at improving services to bank customers. Ruth Kelly also announced that the FSA is to regulate mortgage advice, a move called for by the Julius Group, consumer groups and industry, and, in parallel, the sale of general insurance products. These measures will ensure that a coherent regulatory framework exists.

The measures set out today will:

• Benefit millions of consumers by regularising standards and providing safeguards and minimum standards of mortgage advice;
• Benefit banking customers through easier account switching and clearer account information;
• Streamline and simplify regulation for mortgage advice and general insurance advice;
• Allow brokers to compete for insurance business in other EU countries.

Ruth Kelly said:

“Buying a mortgage is the biggest financial decision of most people’s lives, they need to get it right and high quality understandable advice is crucial. Regulation will ensure a high standard of advice is available across the board to the large number of people, 1.2 million in 2000, who take out mortgages every year. In the rare and unfortunate cases where things go wrong the Financial Ombudsman will be the single body for handling customer complaints.

“DeAnne’s review highlighted areas where improvements should be made to benefit banking customers. There has been a very constructive response with the majority of the recommendations being accepted by industry. The measures being taken forward will benefit customers, for example through making account switching easier and stimulating competition in personal banking.

“The Julius Review group argued that mortgage advice should be regulated, echoing the sentiments of many consumer groups and industry. We have listened to these views and after reviewing the policy believe regulation will bring benefits to both consumers and businesses.”

DeAnne Julius commented:

“I am delighted with the Government’s decision to regulate mortgage advice. This was supported unanimously by our Review Group, because we felt it would help both consumer and mortgage providers. I am also pleased that the banks have agreed to take on board the majority of our recommendations for changes in their self-regulatory codes. With the new cleaner process for code review I am hopeful that in due course those changes they have not yet accepted will also find favour.”

Ruth Kelly added:

“Many of the 12,500 UK mortgage brokers also sell general insurance. In order to maintain a consistent and streamlined approach, the sale of general insurance products will be regulated by the FSA. Brokers who deal in two or more lines of regulated business will deal with a single regulator, not several, and will be able to compete in European markets. Additionally the Government will look at insurance sold as part of a package with another product – for example, travel or extended warranty – to consider the implications of the new regime for them.”

“Today’s measures will benefit industry by simplifying and streamlining regulation.  The watchword in developing the new frameworks will be proportionality.  We and the FSA will be working closely with the industry and others to design a regime that understands the market, and is targeted precisely at maximising benefit to the consumer, and not loading industry and ultimately the consumer with unnecessary costs.”

“I am grateful to GISC and MCCB for all the hard work they have put in to raising standards in their respective industries. Today’s announcement is in no way a criticism of what both bodies have achieved. I hope that they will both be able to work closely with the FSA to ensure a seamless transition to the new regime.”

The timing and details for the implementation of regulation will be discussed with industry. It is anticipated that regulation for both mortgage and the sale of general insurance products will come into force simultaneously, following consultation by the FSA.