On 13 May 2016, the House of Commons Public Accounts Committee (PAC) published the Financial services mis-selling regulation and redress report. The report recognises that both the FCA and Financial Ombudsman Service (FOS) have a role to play in assisting the victims of mis-selling.
The PAC made six conclusions and recommendations:
- The role of Claims Management Companies (CMCs) is to be reduced and HM Treasury and the FCA are to demonstrate what steps they intend to take to achieve this.
- FOS has a two year back log of PPI claims and has been instructed to prepare a timetable for reducing the back log on PPI matters, which will be publically accessible so as to hold the FCA and FOS to account.
- The FCA has not adequately addressed the cultural problems that lie behind mis-selling. The key problems being firm culture and sales incentives. Whilst PAC recognised that some steps have been taken to address this, it has required the FCA to outline actions it will take to improve culture in firms.
- The FCA does not ensure that consumers understand the financial products they buy. Similarly, consumers need to be aware that they may be eligible for compensation when mis-selling occurs. The FCA is to set out what steps it will take to ensure that consumers understand the products they purchase and their right to claim compensation, particularly in regard to vulnerable consumers.
- The Treasury is unable to evaluate how successful the FCA is in reducing the level of mis-selling as there are no clear measurements. The FCA also does not link outcomes from its regulatory activities to their associated costs, so it is impossible to assess whether the most cost-effective action has been taken. Consequently, the FCA and HM Treasury are to develop real-time indicators of mis-selling.
- The National Audit Office (NAO) has limited access to information held by the FCA, which means Parliamentary accountability of the FCA is reduced. Consequently, HM Treasury is to prepare a timetable for proposing legislation to give the NAO access to information so that it can carry out full examinations of value for money.
PAC emphasises its disappointment that CMCs have made up to £5 billion from PPI claims, out of compensation that should have been paid to victims of mis-selling by financial services firms. PAC also confirmed, in line with its recommendations, that the FCA and HM Treasury must do more to know how much mis-selling is happening at present, and which regulatory activities work best to prevent it.