A new set of laws introduced on Tuesday aims to streamline the process of transferring money from a bank account to a personal one, while also protecting investors from being ripped off by high-risk banks.
The government has also proposed a new national credit card scheme that will replace a number of existing financial services for low- and middle-income earners.
The legislation will also see banks charge consumers up to 25 per cent of their annual wages to transfer money.
The Financial Services Regulatory Authority (FSA) said it was concerned about a number issues with the legislation.
The FSA has also been working with the Financial Conduct Authority (FCA) to review the legislation, but stressed that the law was intended to protect people’s money, and would not be used to rip people off.
“This is about the consumer’s money and the people’s investment, so it will be used only for things they really need,” the FSA’s executive director Richard Smith said.
“The government has promised that this legislation will be the safest financial services, but this is not the case.
This will be a step backwards for consumers, for the economy and for the people.”
The government will also be introducing a new system to regulate how high-interest bank loans are charged, which will mean borrowers will have to apply for a loan that is not more than 25 per a cent of income.
The new rules will also apply to new consumer loans.
A key part of the legislation is that it will no longer require people to pay a higher interest rate than the amount they owe, to protect investors from having to pay high fees for high-quality loans.
Under the proposed new rules, the interest rate on a loan would be determined by a national credit limit, which is set by the government.
In addition to the higher interest rates, the new rules would also see the government introduce a new tax on high-cost mortgages, which would be applied to mortgages with a combined total value of more than £500,000.
The FSA also said that it was very concerned that the government was introducing legislation that would be used as a tool to rip off investors.
“If the government is serious about protecting consumers from being taken advantage of, it will have the courage to introduce a national debt-to-income ratio regulation that will prevent banks from charging high interest rates on high quality loans,” Mr Smith said, adding that the FSA had asked for the government to clarify whether it was working with FCA to implement the new regulations.
“The government must now explain what it is actually doing to protect consumers, and why it is doing it in this way,” Mr Smethurst said.
The proposed changes to the banking sector come after an inquiry into the 2008 financial crisis, which found that high-end personal loans had a disproportionate impact on low-income people.
In addition, Mr Smith criticised the government’s handling of the financial crisis.
“It’s been a failure on the part of ministers, and they need to be held accountable,” he said.