The FSA and the Office of Fair Trading (OFT) are to publish draft guidance on payment protection products. It is the first time the FSA has issued guidance on the design of a specific product.

The two regulators are consulting on proposed guidance to firms in relation to payment protection products – which can fall within either regulator’s remit.

They say this is a key time as the market shifts away from PPI and firms begin to develop new products or product features – such as short-term income protection, or debt freeze or debt waiver as elements of a credit agreement or mortgage.

The two organisations will continue to monitor developments in the market, and will take appropriate action under their respective powers where firms’ products or practices risk causing detriment to consumers.

The FSA’s guidance stresses that firms should ensure that product features reflect the needs of the consumers they are targeting.

Margaret Cole, FSA managing director, said: “Firms must learn the lessons of the past and make sure they have consumers’ needs at the heart of new product development.