What the FSA's TCF scheme has done for us

Pound coin in flamesThe FSA set rolled out the Treating Customers Fairly (TCF) initiative years ago in an attempt to improve things for you and me. But little has changed.

Six years ago, a journalist from the Guardian called me for my comments on Treating Customers Fairly, an initiative from the Financial Services Authority (FSA) that had just finished taking shape, after the idea had been knocked around since 2001.
She wanted me to tell her about the huge impact that "TCF" was going to have for consumers.

Unfortunately, I couldn't oblige her. I told her that, according to the back of some brochures from the Association of British Insurers, TCF actually stands for "Totally Chlorine Free".

"TCF," I said, "was going to have no impact whatsoever, except, perhaps, on the ozone layer."

Those aren't the words a hack wants to hear when she's after another easy story. Palpably indignant, she asked me, "Is that all you've got to say?"

Yes. Doubtless, her article, and the more accommodating financial commentator she found to replace me, made TCF sound rather more appealing than me, or even insurance brochures, do.

The journalist never called me again.

What TCF has brought us so far
Let's take a look at how much more fairly we've been treated since the regulator's scheme finally took shape:
  • PPI sales continued for years afterwards. After a tireless campaign led by my colleague Cliff D'Arcy and followed by others, and more than one million customer complaints to a financial ombudsman later, the regulator finally took large enough action to stop the PPI scandal. The FSA had said it expected banks under TCF to fix errors even where "a relatively small number" are found. One million formal complaints suggests rather a few more.
  • Banks carried out all sorts of complex trades they didn't understand, which have contributed to the financial crisis – and that hasn't helped many of their customers. They continue these practices with no retribution.
  • Insurers continue to knock a chunk out of our retirement savings that leaves most people with pensions more than one-third smaller than they should be. Around half those costs are hidden. Check out The next pensions scandal for more.
  • As we recently learned, banks lied about LIBOR for years as TCF got going, which has knock-on effects on everyone, including consumers.
  • Bankers continue to pay themselves massive bonuses for behaving wildly with customers' deposits, while getting their customers to fund them through taxpayer-funded bailouts when they mess up.
  • Banks continue to lend irresponsibly to customers (most of whom have had no financial education) for all kinds of frivolous purchases. This doesn't appear to fit with the specific TCF principle that products are "targeted accordingly".
  • Banks pushed house prices up to unbelievable heights with ultimately calamitous consequences for large numbers of mortgage customers, homeowners, and the whole economy.
  • Still nearly 40 tricks and traps are used to get money from credit card customers.
  • The industry still pushes some insurance products that are unsuitable, or a poor choice, for most customers.
  • Banks still try to entice people into buying all kinds of complicated and expensive products.
You might say that PPI has now been soundly dealt with by the FSA, but dealing with one major problem in six years probably isn't an improvement to the regulator's previous hit ratio.

Everyone must slap downwards
The root of the problem is incentives at the top.

Bank bosses continue to get million-pound pay-offs instead of going to jail, even though the FSA said that it is those bosses who are responsible for setting the culture at their companies about Treating Customers Fairly.

Since the FSA hasn't backed that up with clear personal incentives or harsh punishments for those bosses, it's obvious why they haven't passed suitable incentives and disincentives down the hierarchy.

After the rage that the industry has engendered during this age of "treating customers fairly", it's no surprise that the regulator is getting another new name and being given another makeover next year.

We can hope all the people at the regulator– many of whom are likely to be the same people doing the same jobs in the same chair with a different sign above the door – will announce a new strategy to get banks to treat us fairly.

When they do, though, I suggest that hacks don't call me for my opinion.

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