Consumer protection has, for the most part, been the poor relation of the Irish financial services industry, ranking well below concern for prudential supervision which ensures the financial welfare of the institutions themselves.
When the Irish Financial Services Regulatory Authority (IFSRA) was launched nearly two years ago, the Tánaiste and then minister for enterprise, trade and employment, Ms Harney, said it would change the premise on which financial services operated. Prudential supervision and consumer protection were complementary, not conflicting, concerns, she said.
The publication yesterday of a consultation paper on a Consumer Protection Code marks a significant step forward in raising the profile of the consumer in the financial services industry. The recent record of the financial services sector has been noticeable more for taking advantage of customers than by any concern for their protection. That, in turn, has led to a weakening of the fundamental trust between providers of financial services and their customers.
The draft code seeks to restore the balance. Its overall purpose, it states, is to ensure that financial service providers treat their customers fairly. The code comprises a series of general principles backed up by rules addressing the conduct of the industry in general and of specific sectors within it. These are presented, commendably, in language that is easily accessible by all users of financial services and not just to those familiar with industry jargon.
The general public needs to be protected from the growing practice of financial institutions engaging in the unsolicited offers of debt finance. This, along with issues such as equity release, consolidation of loans, clarity on charges, standards in advertising and the placing of the voluntary code on switching bank accounts on a mandatory footing are all addressed.
Of course, the level of observance will be the acid test of its effectiveness. A criticism of IFSRA's regulatory record to date has been its inability to effectively sanction compliance failure. The authority is currently inviting submissions on how it should frame its sanctions regime. That consultation concludes at the end of the month and it is envisaged that both the consumer protection code and the sanctions regime will be up and running by year end. Only then will customers be able to determine whether their voices can be heard alongside the commercial priorities of the companies selling financial services. The draft code in IFSRA's consultation document is just a start but it is a welcome first step.