New code of practice needed for comparison websites

11 October 2007
NEW CODE OF PRACTICE NEEDED FOR COMPARISON WEBSITES
The Resolution Foundation has called for a voluntary code of practice for price comparison
websites following new research it has published today assessing the leading sites comparing
financial products. (1)
The Foundation’s research highlighted the important role comparison sites play in helping
consumers make informed financial decisions. A poll commissioned from Yougov to support the
research showed that 45 per cent of people have used a comparison site to help them make a
financial decision in the last year. (2)

However, the research also showed that many sites fail to explain the commercial relationships
they have with product providers. This risks misleading consumers who can easily mistake
promotional features such as ‘best buys’ and ‘editor’s choices’ as being the best value products
on the market.

Other weaknesses among the sites reviewed for the research include:

• A failure to explain technical terms, abbreviations and financial jargon
• Unnecessarily requiring personal contact details to be provided to compare mortgages
• and loans
• Failing to provide personalised information in relation to credit cards and savings
• products

The research also highlighted areas of good practice. For example, many sites scored highly in
terms of user friendliness, following consumer testing conducted by Opinion Leader to inform
the research. (3)

With comparison sites coming under fire in some quarters (4), the research
also found that previous criticisms of the sector, such as the damage caused to people’s credit
ratings by encouraging them to make inappropriate loan applications, have been addressed. (5)

The Foundation is therefore calling for a voluntary code of practice to build on the strengths
displayed by the sites and address the weaknesses identified by the research. This would:

• Improve standards and provide reassurance for consumers about the transparency of comparison sites, helping them make informed financial decisions
• Promote a healthy comparison site market without the need for new regulation
• Support Government policies to improve ‘financial capability’ (6) and compliment the introduction of a national service providing generic financial advice (7)

With a recent survey showing that a perceived lack of impartiality could erode public trust in
comparison sites, the Foundation also argues that this is in the sector’s best interests. (8)
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.”

For further information please contact:
Alex Child-Villiers (Temple Bar Advisory) Tel: 07795 425580
Notes to editors:
(1) Compare and contrast: How the UK comparison website market is serving financial
consumers can be downloaded from the Foundation’s website www.resolutionfoundation.org
The research assessed eight of the most popular sites comparing financial products, as well as
the Financial Services Authority’s comparison tables which, unlike the other sites, do not seek
to generate revenue:
· www.moneysupermarket.com
· www.fool.co.uk
· www.uswitch.com
· www.moneynet.co.uk
· www.moneyexpert.com
· www.moneyextra.com
· www.moneyfacts.co.uk
· www.kelkoo.co.uk
· www.fsa.gov.uk/tables
(2) The sample size for the Yougov survey was 2,010 adults. Fieldwork was undertaken from
25-27 July 2007. The survey was carried out online. The results have been weighted and are
representative of all GB adults (aged 18+).
(3) To inform the research, the Foundation commissioned Opinion Leader to carry out user
testing among people on low to moderate incomes. Opinion Leader hosted two focus groups,
one of which comprised people with strong IT skills and the other people with lower levels of
computer literacy.
(4) For example, Direct Line, who do not allow their products to be included in comparison
tables, have launched a high profile advertising campaign attacking comparison sites as
‘middlemen’.
(5) This criticism was made by Professor Merlin Stone in Money aggregators: Paradise or
purgatory for buyers and providers of financial services , a report for MoneyExpert.com in 2006.
(6) In January this year, the Government published a strategy document outlining its long term
plans for improving the nation’s financial capability by, for example, increasing financial
education in schools. This will be followed by an action plan which is due to be published
before the end of 2007.
(7) The Thoresen Review of Generic Financial Advice was announced by the Economic
Secretary to the Treasury on 15 January 2007 and will report to ministers around the turn of the
year. Generic financial advice is advice and guidance which helps people understand their
financial needs and make appropriate financial decisions in light of their individual
circumstances, but does not recommend specific financial products or providers.
(8) See research Quidco’s 2007 Online Shopping Report:
http://www.bizreport.com/2007/08/british_consumers_wary_of_price_comparison_websites.htm
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