The introduction of a code of practice for price comparison websites could help more consumers make informed financial decisions, it has been suggested.
In a report released earlier this week by the Resolution Foundation, it was indicated that many consumers make use of such sites when looking for the best rate on personal loans or other type of monetary product. The company also pointed to a poll commissioned by YouGov earlier this year, which revealed that 45 per cent of Britons have made use of a price comparison website in the last 12 months to help them reach a financial decision.
And although these portals were generally praised for their user friendliness, the firm suggested that by creating a voluntary code of practice for price comparison websites, people could become more knowledgeable when considering whether to borrow money. This in turn could them help to select cheap loans and other types of financial products more effectively. Implementing such moves, it was asserted, would also support the government's drive in boosting the country's financial capability and promoting a national generic economy advisory service.
The foundation also pointed out that the sector has successfully addressed previous criticisms such as the proposal that encouraging consumers to make "inappropriate" loan applications has damaged their credit ratings. However, it was suggested that improvement needs to be made in explaining the various technical terms and abbreviations associated with fiscal products.
Commenting on the study, Clive Cowdery, chairman of the Resolution Foundation, said: "Comparison sites are valuable in making informed financial decisions - but many sites are undermined by a lack of transparency about their commercial relationships. A voluntary code of practice would address this and encourage a growing market, without the need for further regulation."
Stuart Bernau, executive director for Nationwide, added: "It's vital consumers can make informed decisions about the financial products and services they choose. Comparison sites and best buy tables play a vital role in helping people make their choices and we would welcome a code of practice as it would bring reassurance to consumers who use these sites." Mr Bernau added that "for far too long", consumers have been tempted by products which at first look attractive, only to find that upon taking out such an item it fails to deliver "its promised value". The director also asserted that financial providers, as well as price comparison websites, should be "open and transparent" about the services which they offer.
Consequently, such moves towards regulation of comparison sites may help prospective borrowers unearth cheap loans and other types of credit with greater ease. Speaking earlier this year, Richard Al-Dabbagh, senior personal loans manager for Alliance & Leicester, reported that by not taking the time to search for competitive borrowing options many people could be putting unnecessary pressure on their finances. He stated that those "paying over the odds" by financing spending through store cards could save a lot of money by switching to a low-rate personal loan.
Mr Al-Dabbagh's comments come as research from the company showed that 12 per cent of borrowers aim to make sure they use the money acquired from loans and other types of credit wisely, so as to finance major purchases such as a new car or DIY projects.
Author Resource:-
Steve Smith writes for the 1 Stop Finance Shop where you can apply online for debt consolidation loans. We specialise in all sorts of personal loans, and secured loans with online application.
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