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Clarity of loans offers 'needs to improve'

Published: 14/10/2009

Financial products including personal loans should be made easier to understand for consumers, an expert said yesterday.

In a speech to the Building Societies Association, Adam Phillips, chairman of the Financial Services Consumer Panel (FSCP), said that products should be "described fairly simply" in order to iron out potential misunderstandings.

He added that a financial offer should "do what it says on the tin" and that the changes could result in an increase in public trust levels of banks and building societies.

The firms' standing has been damaged by the onset of the credit crunch and recession in the UK.

Financial pressures from the crisis have caused many banks and building societies to tighten their credit criteria.

A total of five financial services providers have also been partly or fully nationalised by the government.

Mr Phillips said: "The industry should consider developing design criteria for particular types of product which would guide 'good' product innovation and restrict innovation that conceals cost or risk in the pursuit of providing an apparently better price or higher rate of return.

"Doing this would be a major step towards improving consumer confidence in financial services."

Mr Phillips' comments precede the takeover of retail bank regulation by the Financial Services Authority, which occurs next month.

The FSCP advises the City regulator on consumer issues.

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