FCA seeks change in culture to make consumer contracts more transparent

The regulator's director of policy, risk and research Christopher Woolard said that whilst the FCA cannot force companies to sell simple products only, he said they need to improve how complexities to the financial products they sell are explained.

"I am sure we would all like to see financial products, particularly essential retail ones, that are transparent and fully understood by consumers," Woolard said in a speech at the Tax Incentivised Savings Association (TISA) annual conference in London on Wednesday. "The issue is, when product choice is complex and terms and conditions lack transparency, consumers often become apathetic about financial services and limited in their ability to compare products."

Earlier this year a Government-commissioned steering group, led by the Bank of England's former head of major banks' supervision Carol Sergeant, recommended that a range of simple financial products be developed to be sold by financial services companies. These include easy access savings accounts and fixed term life insurance products.

The group agreed on high-level principles around product features, language, terms and conditions, price transparency, the purchasing process among other factors for defining whether financial products could be considered simple or not.

Woolard said that product simplicity can "help to build consumer trust and engagement, and encourage product comparison and shopping around" but said it "remains to be seen ... whether the foundations built in the Sergeant Review are transformed into tangible changes for consumers".

He called for the financial services industry to commit to developing simpler products but also said that a change in culture by the companies could itself provide a solution to the problem of consumer confusion.

"Too many times we hear of consumers caught out by clauses hidden in terms and conditions or of products sold that don’t meet their needs," Woolard said. "That culture of terms and conditions designed solely for the firm has to change."