New rules will target high-risk products

A BAN on risky financial products could be introduced next year under consumer protection proposals unveiled by the City watchdog yesterday.

The Financial Services Authority (FSA) said its approach to regulation would become more intrusive and aggressive in order to protect consumers from being mis-sold high-risk products.

The new regime would come into force in 2012 with the creation of the Consumer Protection and Markets Authority (CPMA), which would have the power to ban products thought to pose a financial risk to consumers and to set maximum prices for particular services.

Teh CPMA would also be able to issue risk warnings on products and force providers to limit sales of some products to certain groups of consumers.

Lord Turner, chairman of the FSA, said the watchdog wanted to ensure that potential consumer detriment problems are identified and offset at an early stage.

Peter Vicary-Smith, chief executive of consumer group Which?, welcomed the proposals.

He said: "If left to its own devices, the industry will spend its energy inventing products and sales practices that fill the balance sheets but don't deliver for their customers.

"From pension and endowment mis-selling to payment protection insurance and, most recently, the emergence of identity theft insurance, this hall of shame is evidence enough that a new approach is long overdue."