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Regulators under fire for failing consumers

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Regulators need to do more to show they are offering consumers enough protection, a report by the spending watchdog has concluded.

The National Audit Office (NAO) has found that the four main regulators – Ofwat, Ofgem, Ofcom and the Financial Conduct Authority (FCA) – understand the difficulties facing consumers, but are failing to provide evidence that they are responding effectively to consumer concerns.

Regulators are responsible for protecting consumer interests across the utilities, communications and financial services sectors. This includes promoting competition, encouraging fair prices, setting maximum prices where competition is insufficient, ensuring adequate services are delivered and preventing unfair practices.

The NAO found the most common problem that people require help with across all four regulated sectors was debt associated with paying bills and credit repayments.

Consumers also find it difficult to access the best deal or service, which means customers who do not switch typically pay more for the same service as new customers. This ‘loyalty penalty’ costs consumers an estimated £4.1bn a year at least.

The report said: “The four regulators have developed a good understanding of these consumer issues through their own research, insight and working with stakeholders.

“However, government, Parliament and other stakeholders have expressed concerns about whether these sectors are working as well as they can for consumers, raising questions about the effectiveness of the regulators.”

The NAO has recommended that regulators do more to measure their performance so that they can understand what is working well for consumers and what isn’t.

Amyas Morse, the head of the NAO, said: “Regulators need to do more to show the concrete results they are aiming to achieve for consumers. I understand that there is a difficult balance to be struck between long and short-term outcomes, between the needs of businesses and the interests of consumers.

But at present the regulators’ results can come across as somewhat academic and detached from peoples’ practical concerns and pressures.”

What the regulators say

An Ofcom spokesperson responded: “We welcome this report. In particular, we’re pleased the NAO recognises that regulators understand and use consumers’ concerns to inform what we do. We’ll keep working closely with other regulators, exploring different ways to measure the effectiveness of our work.”

Ofgem said: “We’ll keep working closely with other regulators to identify what further steps we can take to improve the way we measure our performance.”

Owat commented: “The NAO is challenging us to do more to track and demonstrate how we do this and we are already working on implementing their recommendations.”

Andrew Bailey, chief executive of the FCA, said: “Protecting consumers is absolutely central to the FCA and where we have identified potential harm we have taken decisive action. Our recent work in the high-cost credit market, including implementation of the price-cap in the rent-to-own market, is just one example of this.’

“Understanding the impact of our interventions is an important part of our mission to ensure that financial markets are working in consumers’ best interests. We will consider the National Audit Office’s recommendations when evaluating our work to protect consumers.”

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