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Wednesday, 3 October 2012

Know your financial rights

A firm selling financial products and services has to follow certain rules and standards laid down by the law and the relevant financial regulators. These are designed to protect consumer rights. If a firm doesn't follow the rules, you can complain about them. Your rights are especially protected if you've taken financial advice.

The Financial Services Authority (FSA)

The FSA is the UK's financial regulator set up by the government to regulate financial services in the UK and protect the rights of consumers. It sets out rules that most financial services businesses must follow.

Firms that are authorised by the FSA must:

  • be financially sound and trustworthy
  • provide competent advisers
  • provide clear information to help you make your financial decisions
  • have clear procedures for making a complaint
  • tell you about compensation arrangements for the business they're conducting

The Money Advice Service website provides free information and guidance on everything to do with personal finance. This information includes details of what financial advisers should give you, and questions you should ask. To find out more, visit their website.

How to check whether a firm has FSA authorisation

To check whether a firm is authorised by the FSA you can use the online Check our register service.

The Office of Fair Trading (OFT)

The OFT is the licensing authority for consumer credit businesses. It protects the interests of consumers by monitoring the fitness of those applying for or holding licences. Consumer credit businesses include financial advisers, brokers and other intermediaries, as well as those who help people with debt problems or advise on their credit standing.

The OFT also enforces the Consumer Credit Act and regulations, jointly with Local Authority Trading Standards Services.

Firms licensed by the OFT must:

  • be competent to engage in credit activities
  • comply with relevant legislation and guidance
  • provide information before and after an agreement is made
  • subscribe to the Financial Ombudsman Service scheme

How to check whether a firm has a consumer credit licence

To check whether a firm or individual is licensed by the OFT you can search the online Consumer Credit Register on the OFT website.

Buying with and without advice

By going to an authorised firm for advice you will receive some protection. For example, FSA-authorised firms have to abide by the rules and minimum standards set by the FSA. Also, if an FSA-authorised firm gives you advice that's wrong for your circumstances, there is a system to resolve complaints and, if necessary, put things right.

Similar protections apply where firms are licensed by the OFT.

When you buy without advice, you are responsible for your decision to buy and if the product turns out to be unsuitable you will have fewer grounds for complaint.

The difference between information and advice

It's important not to mistake 'information' about a product for 'advice'.

Firms' advertisements, brochures and websites give details about their products, but they don't give you personal advice.

Your right to complain

If you're not satisfied with a financial service or product you've bought, you have the right to complain. You should first complain to the firm that sold you the product or service. If you're still unhappy, you may be able to get help from an independent complaints scheme, such as the Financial Ombudsman Service (FOS) or the Pensions Ombudsman. Taking a firm to court will usually be the last resort.

See 'In this section' below for more information on how to make a complaint.

Data protection and your rights

Before an organisation can hold your details on file, they must be registered under the Data Protection Act. You can also ask to see what information they hold about you.

Credit checks

Before being able to buy a financial product, you may have to give a firm information about your financial circumstances.

If a loan or mortgage is involved, the firm may also need to run a credit check using one of the UK's three credit reference agencies. This involves looking at your credit history, which helps the firm decide whether or not to grant the loan or mortgage. You have the right to know what information is held about you, and to get it corrected if it's wrong.

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