UK government inquiry told EU wide misselling redress needed

Published:  29 Jul at 6 PM
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As complaints against the mis-selling of financial products soars across European states, a UK Parliamentary enquiry has been advised that an EU-wide mechanism for consumer redress is badly needed.

Although EU law on consumer protection has been updated since the 2008 crash, redress for consumers with mis-sold financial products has remained the responsibility of separate member states. At the present time, the UK Financial Ombudsman is handling a massive number of claims relating to both banks and FA firms accused of ignoring due diligence and worse.

British law allows consumers to take legal action against mis-selling, but the process is lengthy and expensive, with the majority of victims unable to afford the service. According to Cambridge University’s senior research fellow Kern Alexander, further regulatory reform is needed to give easier access to redress for retail-end consumers.

A stringent, EU-wide consumer redress policy would help those retiring overseas, as it would curb the activities of unlicensed, commission-hungry salesmen pushing unsuitable investments to expats looking to secure their pension pots. Recent media reports spotlight Spain as a hotbed of the activity, with many older expats falling victim to unprincipled practices condoned by offshore product providers.

However, new legislation within the EU is unlikely to be of assistance to expats in Asia, where regulation is weak and corruption is rife. Last year’s spectacular failure of the Australian LM property fund led by Peter Drake has caused expat investor losses of many millions in Hong Kong, China and South East Asia, including Thailand, Malaysia and Singapore.

LM Victim groups have been set up, but are being stymied by the disappearance of a number of salesmen and hamstrung both by the problems of legislation across borders and the fact that many FAs involved were working illegally in their host countries. However, several groups state they are in for the long haul, and are aiming at the offshore product providers as well as those who mis-sold the bonds.

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