When choosing a bank, building society, credit union or insurance company, it’s crucial you are confident in their abilities and that they deliver a fair service.
For UK financial markets to work well, competitively and fairly, they need to be regulated (keep reading to find out what this means). Stringent regulation benefits consumers and competitors alike.
Here, we explore the role of the Financial Conduct Authority (FCA) - you’ve likely heard their name being mentioned at the end of adverts for banks or credit providers - and its rules, to better understand its role and importance.
First, let’s explore why it’s important to be regulated by the FCA…
Why is it important to be regulated by the FCA?
Being regulated by the FCA offers you peace of mind that an organisation is compliant with the regulations the FCA sets out.
Essentially, when looking for a new bank, credit lender or insurance, you should expect to see that an organisation is regulated by the FCA (and keep an eye out for those that aren’t).
What is the role of the financial conduct authority?
In 2013, the FCA was set up to ensure:
Consumers are protected from bad conduct
The integrity of the UK financial system is protected
Effective competition in the interests of consumers is promoted
The FCA now regulates around 50,000 businesses to ensure that financial markets are honest, competitive and fair.
How does the FCA protect consumers?
One of the main benefits of being regulated by the FCA is the legitimacy it gives to financial institutions. Almost every adult in the UK is a consumer of some type of financial service (from phone contracts to mortgages), so ensuring a fair playing field is crucial to millions of people’s lives and finances.
To protect consumers, the FCA’s rules and regulations ensure:
Customers are treated fairly
Financial firms deliver appropriate products and services
Firms prioritise customer protection above profits and income
Firms are required to comply with these standards in order to receive the FCA’s stamp of approval and to remain authorised too. If a company isn’t following the rules, the FCA may impose fines, stopping the organisation from trading or getting compensation for consumers.
Ultimately, this approach intends to guarantee that consumers receive the information they need in the right way - enabling people to make the best decisions for themselves.
Another benefit of FCA regulation is that consumers can complain and report any wrongdoing to the Financial Ombudsman Service (FOS). The FOS was set up by Parliament to resolve complaints between consumers and financial institutions, with the aim of…
Treating customers well and respecting their needs
Doing what they say they will do
Being inquisitive and building everyone’s knowledge
Doing the right thing
Are buy now pay later firms regulated by the FCA?
The FCA does not currently regulate all buy now pay later (BNPL) schemes; however, in June 2022, the Government announced plans to regulate all BNPL firms from mid-2023.
Why do BNPL firms need to be regulated?
The FCA reviewed the terms and conditions in the contracts of Clearpay, Klarna, Laybuy and Openpay, and discovered:
Contract cancellation terms
The firms’ ability to terminate or suspend accounts
Continuous payment authority terms
Upon finding these things, the FCA contacted the companies, who initiated changes in terms to make them fairer and easier for consumers to understand. This change exemplifies the importance of the FCA.
Is Fair for You regulated by the FCA?
Yes, we’re proud to be regulated by the FCA and to have our customers’ best interests at the heart of everything we do.
Fair for You is a not-for-profit organisation that is owned by the Fair Credit Charity. We believe that all people should be able to access fair credit, regardless of their background and financial circumstances.
For more information on how Fair for You is run, explore our blog. We’re committed to ensuring transparency and have articles explaining how our Food Club Card works and what a community interest company is.
As well as explaining how we operate, you’ll also find actionable tips for managing your money, including: