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Wednesday, 12 December, 2001, 17:32 GMT
City watchdog handed wider brief
Financial consultation
Consumers value good advice
The Financial Services Authority (FSA), the City watchdog, is to regulate mortgage advice and the sale of general insurance products to protect consumers from bad advice and mis-selling.

The announcement by Economic Secretary Ruth Kelly, follows the publication in July of the government-sponsored DeAnne Julius report into banking and financial services.

The decision was welcomed by the Consumers' Association, who hailed it as a "great victory for consumer protection and a brilliant early Christmas present".

No timescale has been given for the changes, and the FSA must consult with industry before they are introduced.

The FSA currently regulates life assurance, but does not regulate the sale of mortgages, general insurance products or life protection policies.

Mortgage change

The FSA's new regulatory powers will oversee the sales of mortgages, general products and also life protection policies.

It will not change the content and price of the products.

Existing industry bodies - the Mortgage Code Compliance Board and General Insurance Standards Council - will continue to have a role.

Sheila McKechnie
Sheila McKechnie: "Early Christmas present"

Ruth Kelly said that it was vital that people got the right mortgage advice, when it was the "biggest financial decision of most people's lives".

She said: "Regulation will ensure a high standard of advice is available across the board to the large number of people - 1.2m in 2000, who take out mortgages every year."

The decision to regulate mortgage advice is a change of heart by the government.

Under so-called N3 changes, the FSA was to assume regulation over the type of "information" given to consumers - and not advice.

The FSA said that it would conduct a full review of N3 changes in the light of its new role.

Insurance standard

The selling of general insurance, such as travel, motor and home insurance is currently overseen by the General Insurance Standards Council.

But the new measures will expand the FSA's insurance brief widely.

General insurance includes travel, home, motor insurance, and pet insurance.

Intermediaries, such as brokers, and the sale of life protection products - currently not regulated by the FSA - will also be brought into its remit.

Under the new regime, insurance intermediaries, will be allowed a "passport" to sell insurance products into other European Union member states under the Insurance Intermediaries Directive.

The Treasury said that its measures would "streamline" regulation.

Measures welcomed

Sheila McKechnie, director of the Consumers' Association welcomed the strengthening of financial services regulation.

She said: "This is a great victory for consumer protection and a brilliant early Christmas present.

"We are delighted that the Government has listened to consumers and has acted decisively to regulate the mortgage advice process.

See also:

01 Dec 01 | Business
New powers for City watchdog
17 Oct 01 | Business
FSA 'must take stronger line'
30 Nov 01 | Business
City watchdog: New powers explained
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