'Buyer beware' won't get you off the hook, banks told The new rules will also cover products such as payment protection insurance and investment products which are sold to consumers. The FCA is one of two new regulators that have been formed to replace the old Financial Services Authority. Its main priority is protecting consumers and preventing the mis-selling scandals that have blighted the financial industry in recent years - costing many banks, insurers and fund managers billions of pounds in compensation payments over the past decade. Mr Wheatley said the FCA will draw on the emerging field of behavioural economics to better understand how consumers make financial decisions. This has led to the change of heart on "buyer beware" - a principle that has underpinned financial regulation for years. This follows other changes to consumer regulation. Previously insurers could decline a claim if a consumer had failed to disclose information about their medical history or family circumstances, even if this information had not been specifically asked for. However, a new insurance law, introduced last week, now states that if an insurer has failed to ask for this information when setting up the policy the claim can't be turned down at a later stage for non-disclosure. Etay Katz, a financial services lawyer at Allen & Overy, said Mr Wheatley's speech marks a significant shift in responsibility, particularly for banks that are selling financial products to a wide range of consumers, many of whom will have no specialist financial knowledge. "The broader concern is that this will not only be applied just to retail but also to wholesale as well, so you can't assume a big investor like a local authority has the expertise that can be relied on," he said. Mr Wheatley signalled that the FCA will use behavioural economics to better understand many aspects of consumer behaviour. Unlike traditional economics, which assumes people will tend to behave rationally, this looks at how social and emotional factors can affect people's decisions. He said: "We want the regulatory system to use behavioural economics to ascertain whether people are being put off switching products through inertia, inattention or even the simple fear of regret from making the wrong decision." A spokesman for the Financial Ombudsman Service welcomed the change, as it brings formal regulation closer in line to its own practices. A spokesman said this was one of the "many positives" about the new regime. The new regulator has also said it intends to act more quickly when it suspects there might be a problem that could lead to consumer detriment.