HC Deb 24 March 2004 vol 419 cc842-3W
Mr. Gardiner

To ask the Chancellor of the Exchequer what assessments his Department has made of the costs to the economy as a whole caused by poor consumer understanding of the(a) financial services and (b) consumer credit industries. [163360]

Ruth Kelly

Poor consumer understanding of financial services can arise through imperfect information and low levels of financial literacy.

The Financial Services Authority, as part of its statutory objective to promote public understanding of the financial system, has published research (Occasional Paper 19) looking at how much a typical consumer would lose depending on their lifestage, reflecting the financial products held. For a typical young family this would equate to £268 per annum. No aggregate figure for financial services is available.

The White Paper "Fair, Clear and Competitive: The Consumer Credit Market in the 21st Century" (Cm 6040) estimates that informational problems associated with unsecured lending in the credit market give rise to complaints of consumer detriment approaching £40 million per annum. The White Paper estimates that increasing the transparency of agreements could save consumers a total of £381 million per annum as consumers are better able to shop around for the best deals.

Raising standards of financial literacy is an important part of the Government's wider strategy to reduce social and financial exclusion, and promote appropriate participation in the financial services industry, while tackling over-indebtedness, and promote saving.

Mr. Gardiner

To ask the Chancellor of the Exchequer if he will commission research to assess consumers' understanding of the different regulatory systems for equity release and home reversion schemes once the new Financial Services Authority's regulation comes into force.[163380]

Ruth Kelly

Sales of mortgage-based equity release schemes, also known as lifetime mortgages, will be regulated by the Financial Services Authority as from 31 October 2004. The Government are considering responses to the consultation on whether home reversion equity release schemes should also be regulated by the FSA. An announcement will be made in due course. The Government therefore have no plans to commission research to assess consumers' understanding of the different regulatory systems once the new FSA regulation comes into force.