Assuming that customers have no responsibility for their actions is not good for customersby Anthony Browne / December 17, 2013 / Leave a comment
How obscure the words caveat emptor now seem. For decades this Latin phrase meaning “buyer beware” was the key tenet of consumer law. But it was also a principle used to pernicious effect by unscrupulous businesses which claimed that if a customer got a bad deal it was simply because he or she had not conducted sufficient due diligence.
The growth of consumer protection in the last half century has rightly put paid to that, to the benefit of both customers and good companies. But today’s daytime television adverts and the incessant text messages from no-win, no-fee law firms underline how we have entered a new era. And it is not an era that is necessarily good for customers, or indeed competition.
This new era has come about in the wake of the financial crisis, and the various mis-selling scandals that showed—in the confession of one chief executive—that banks lost sight of their customers. The scandals didn’t only give rise—and money—to the claims management industry, but also changed the attitudes of regulators.
The now defunct Financial Services Authority said before the financial crisis that “the overriding principle is that the consumer should act reasonably,” adding that: “they must make a reasonable effort to understand what is on offer and properly evaluate the information provided.”
Now the focus is on making sure that banks anticipate the wants and needs of customers, and ensure they receive a fair outcome regardless of whether the sale was with or without advice. The FSA’s successor, the Financial Conduct Authority, stated recently that it would focus on “putting more responsibility on providers to ensure that products only reach the customers they were designed for”.
Now, if a customer wants to upgrade to a packaged bank account, they can face lengthy questioning about what other types of insurance they hold to check they do not already have travel or medical insurance. Those seeking an interest-only mortgage can expect to have to prove to the bank that they will be able to repay their home loan.
This level of consumer protection goes far further than any other sector, and there is a good justification for that: products are more complex, the amounts of money involved can be much bigger and any miss-selling can take decades to come to light. It is also absolutely right that banks should take responsibility for selling things to customers that they need.