Instead the CPMA should be forced to promote competition, the TSC said.
The Committee criticised financial secretary to the Treasury Mark Hoban for failing to confirm this would be written into the new regime.
The government risks creating a “moral hazard” if it endorses a regulator as a consumer champion as people may falsely believe all financial products are risk free, the influential Committee warns.
“We strongly urge the government to drop the title of ‘consumer champion from the CPMA’, the TSC says in today’s report on the plans to overhaul financial services regulation.
“Financial markets manage and price risk; they do not remove it”, it added.
The CPMA should instead focus on increasing competition, which it said is a “highly effective” means of protecting consumers interests.
“The transparency which effective competition brings should also reduce the need for “heavy-handed” regulation”, the Committee says.
Elsewhere in the report, the TSC raises concerns the financial reforms risk placing non-banking sectors under “inappropriate regulation”.
This could cause “serious and unintended damages to companies within those sectors and to the UK more widely”, it said.
