The Public Accounts Committee – the House of Commons Committee that scrutinises the value for money of public spending by civil servants, has published a report entitled ‘Financial services mis-selling: regulation and redress’.
The report says that “there remain substantial risks of further mis-selling” in the future, and also makes reference to “cultural problems within firms that make mis-selling more likely.” It urges the regulators and other authorities to act, adding that “the FCA and the Treasury must do more to know how much mis-selling is happening.”
It says there are two main drivers for mis-selling: products being complex and difficult for consumers to understand, and the culture and incentives to mis-sell that may exist within firms.
The Committee also comments that claims management companies (CMCs) have collected up to £5 billion of the compensation that was due to victims of mis-selling, and says that “[fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][Government] departments and regulators have been far too passive in allowing this to happen.” The fact that CMCs have collected so much of the compensation (as fees) is described as “a failure of the system of regulation.” The Committee calls for the Treasury and the Ministry of Justice to report on how they will reduce the role CMCs play in the payment protection insurance (PPI) compensation system; and requests that the Treasury and the Financial Conduct Authority (FCA) set out how they will ensure that CMCs do not collect as large a share of the compensation in future mis-selling episodes.
The FCA has been asked to report to the Committee in 12 months time on the actions it is taking to improve the culture within authorised firms, and on the steps it is taking to ensure firms check that their customers understand the products they are purchasing.
The Committee welcomed the fact that the FCA had promoted changes to firms’ remuneration systems and had introduced greater individual accountability via the Senior Managers Regime. However, it said the regulator had still not set out its expectations of what type of culture firms should operate, and warned that the recently introduced pension freedoms gave rise to considerable risks of future mis-selling.
The Financial Ombudsman Service (FOS) has been asked to provide a clear timetable for reducing and ultimately eliminating its backlog of PPI cases. As of November 2015, 45% of the PPI cases being considered by the FOS were more than one year old, and 17% were more than two years old. Half of the PPI cases closed in the first half of the financial year 2015/16 had taken 15 months or more to resolve.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.[/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]