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Economy pushing consumers into risky products

Economy pushing consumers into risky products

Category: Banking

Updated: 14/12/2012
First Published: 13/03/2012

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
The challenging economy is pushing some consumers to take risky financial products, the Financial Services Authority (FSA) has said.

The warning comes as the regulator has revealed the main risks that potentially face consumers in the financial services market over the next year to 18 months.

Research by the FSA has found that people are continuing to feel the effects of the slower economy, low interest rates and slender returns on investments.

In an attempt to turn their financial fortunes around, there is evidence that many people are trying to tackle this by saving more, shopping around and paying off their debt.

"As a result, one of the major risks consumers face is buying and being sold unsuitable products - everything from products that are too risky for them, to products they do not understand or that do not meet their individual circumstances," said the FSA.

Fears over more mis-selling or consumers taking products not suitable for them come against a backdrop of banks putting aside billions of pounds in redress for payment protection insurance.

Martin Wheatley, FSA managing director, said: "Consumers rely on financial firms and their products to provide them with vital services - literally the means to run their lives.

"They need to be able to trust that the products they buy work for them and that they are getting a fair deal. But our report today shows that consumers worry they aren't being sold the right products or products they don't need."

The FSA has pinpointed 15 areas that it is concerned could pose a risk, including:

The FSA says it will look to work with firms over the next 12-18 months to identify risks and help them minimise the effect on consumers.

"Early intervention to try and stop issues escalating into mass consumer detriment is one of the main objectives of the FSA's conduct agenda this year, particularly as it develops the approach of the successor body, the Financial Conduct Authority," added the regulator.

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