The report was issued by the All-Party Parliamentary Group on Investment Fraud and Fairer Financial Services – let’s refer to it as ‘the APPG’ for convenience. APPGs like this are informal cross-party groups that have no official status within Parliament. Their impact comes through the connections they make, the discussions they hold and the reports they issue.
To give you a taste of how damning their report on the FCA was, here are the titles given to its first five ‘principal findings’…
- The FCA is widely seen as incompetent
- Its integrity is called into question
- Its treatment of whistleblowers and their evidence is alarming
- Defective organisational culture, driven from the top
- Transparency and accountability is lacking
I’m not going to explore what’s behind these issues, nor orientate this article around my own judgement of the FCA. Instead, I’m going to look at how I see the impact of the report rolling out across the financial services landscape here in the UK.
The impact of the report lies in the contribution it makes to a view that the FCA is not doing enough. For some, that’s putting the situation extremely kindly, perhaps too simply. Bear with me. My point here is to judge neither the report nor the FCA. Instead, I’m going to explore a key development that I think the report will influence.
And I want to start by briefly looking at a couple of other business sectors: the energy market and the market for postal services. Both are regulated – the former by OFGEN and the latter by OFCOM. Yet that is only part of the picture. As firms in both sectors will be acutely aware, alongside both of those regulators sits a statutory consumer advocate. And in both cases, this is Citizens Advice.
The Problem with Regulators
Here’s how Citizens Advice describes the gap it fills in these two markets as a statutory consumer advocate:
“…regulators aren’t well equipped to quickly spot emerging and existing causes of consumer harm. They don’t have the vast amount of real time front line data we do, and are often overwhelmed with the number of different priorities they’re juggling. Sometimes they’re just not looking hard enough. Even when they do accept there’s a problem, new regulations can take many months or even years to put in place.”
These issues will sound pretty familiar to people weighing up the situation at the FCA.
Are Financial Services Next?
The obvious question then is: does Citizens Advice have the role of statutory consumer advocate for financial services in its sights? They themselves answered that in an article posted on Medium in March 2024. Describing financial services as ‘an essential service’, Citizens Advice’s head of policy had this to say:
“There are few things which could have more of an immediate positive impact for consumers than closing the consumer advocacy gap in telecoms and financial services. We’re calling on all political parties to make this a priority following the next election, whichever party ends up in power.”
This was of course written before the Labour Party won the General Election in July 2024.
Hold on a second, some of you will be saying. What about the existing consumer bodies in financial services? Here’s Citizens Advice’s take on them…
“In telecoms and financial services consumers are represented by a part time expert panels, the Financial Services Consumer Panel and the Communications Consumer Panel. These panels have a limited budget to carry out research with consumers and provide largely behind the scenes advice to the regulators on consumer issues. They do add value, but are no replacement for a fully independent, full-time consumer advocate which has the resources, powers and frontline experience to be the vocal, influential voice consumers really need.”
The Problem for Consumers
In short, something much more powerful is needed. That takes us on to the role that a ‘much more powerful’ representation for consumers would be tasked with. Citizens Advice describe the problem in this way…
“It can… be far too easy for well-resourced and powerful industry voices to influence regulation in their favour. As well as being able to exert huge amounts of influence over the regulatory making process, firms can also force favourable changes to regulations after the fact through an appeals system heavily weighted in their favour.
…essential markets are very complex, and regulations can be technical and near impossible for your average consumer to understand and engage with, even if they wanted to. This tips the balance of power further towards companies.
As the consumer advocate for energy, post, and (cross-sector) we’re given funding and special powers to champion the interests of consumers in these markets, providing a counterbalance to the powerful industry lobby.
We do this in a wide range of ways, from spotting and highlighting trends in our frontline data and commissioned research to persuade the regulator and government to take action, to fighting the consumer’s corner at technical meetings about complex regulatory changes.”
Now some of you would challenge whether this is really needed vis-à-vis the insurance sector. And while there are differences of opinion on this, they are to a very large degree irrelevant. That’s because the judgements that really matter are those of policymakers in the Treasury and on the Treasury Committee.
What the APPG’s report on the FCA does is move the UK Government closer to a decision on appointing a statutory consumer advocate for at least some part of financial services, if not the whole of it. It adds to the evidence base for a statutory consumer advocate being needed in relation to financial services.
The Missing Ingredient
It’s all very well adding fuel to a fire, which is what the APPG’s report does in relation to doubts about the FCA. What is still needed though is a spark. And that spark is already in the hands of Citizens Advice. It is their ethnicity penalty campaign.
Their third and latest report, published in July this year, set out why Citizens Advice thought that too little was being done to address the reasons why people of colour are paying more for their motor insurance. They repeated calls from their 2022 and 2023 reports for the FCA and motor insurers to address this issue. It read like a polite warning that nothing really had happened, and that that needed to change, one way or another.
In 2025, I expect to see Citizens Advice take clearer and bolder steps to have itself appointed as the statutory consumer advocate for financial services. Insurance will certainly be part of what they seeking appointment to. And to be honest, this is something I’ve been telling clients since 2022 to expect and prepare for.
So what should insurers expect from such an appointment? It amounts to what I referred to in this article from January 2024 as ‘forced transparency’. Citizens Advice will use its unique access to vast amounts of data about micro consumer outcomes, to identify trends and require firms to divulge relevant information.
For insurers, it will feel like nothing they do can be sure of being kept confidential. For sure, a statutory consumer advocate will be able to fight “…the consumer’s corner at technical meetings about complex regulatory changes”, but its main impact will be evidencing detrimental consumer outcomes far quicker than the FCA was ever able to do, and using it to “…persuade the regulator and government to take action.”
To Sum Up
Members of the UK Parliament like to bang tables. The APPG report does just that in respect of the FCA. What this does is add to the growing noise around how the FCA is underserving consumers and overserving the market. That situation provides just the right conditions for Citizens Advice to take its call to be appointed as the statutory consumer advocate for financial services, from an article on Medium, to the corridors of political power. I wonder if it might not already be happening.
