13th May 2016
Parliament’s Public Accounts Committee has warned there are substantial and continuing risks that financial services and products will be missold and that too little has been done to tackle the cultural problem that lead to it.
In a report on misselling, the PAC demands that the financial watchdog develops a better understanding about which of its regulations prevent misselling in future.
The committee also expressed disappointed that claims management companies have made up to £5 billion from payment protection insurance (PPI) claims, describing this as “a failure of the system of regulation and redress”. The sum represents almost a quarter of the compensation paid out.
More than 12 million consumers were mis-sold PPI and firms have paid over £22 billion in compensation to them since April 2011.
The committee is concerned that 80% of claims made to the ostensibly free Financial Ombudsman Service came through claims management firms.
The committee says the pensions freedoms reforms are a potential trigger for future mass misselling.
Meg Hillier MP, Chair of the PAC, said: “The widespread misselling of PPI is a vivid demonstration of the risks facing consumers in the financial services market.
“The fall-out is still with us. Many people have waited years for a decision on compensation and, because of the way they have pursued their claims, even then they may not receive the full amount. Serious risks of further mis-selling remain.
“It is vital the Government and regulators take fresh action now to better protect taxpayers’ interests, both in reducing the potential for misselling and, when it does occur, to ensure those affected get their due compensation.We heard evidence of some diverse causes for products being missold, ranging from incompetent or intimidating sales teams to badly designed and poorly targeted products.
“It is deeply worrying that while the FCA has taken some action to deal with these causes, it has since scrapped plans for a review of banks’ culture—this despite it being best placed in the system to conduct such a review.
“This sends a confused message to taxpayers and will do little to reassure potential customers. Our Report sets out practical measures to address this and ensure the interests of taxpayers are paramount now and in future.”