The National Audit Office (NAO) has recently released a report on financial services mis-selling: regulation and redress in relation to mis-selling by authorised firms in the financial services market. The report considers the roles of the FCA, the Financial Ombudsman Scheme (FOS) and HM Treasury in the management of mis-selling cases, addressing both the administration of redress schemes and the regulatory responses and penalties imposed on firms.
In conclusion, the NAO has stated that the complexity of products, continuing commercial incentives to achieve sales and the difficulties in changing cultures within firms means the risk of mis-selling remains. It believes that the FCA’s understanding of the cost-effectiveness of different interventions and redress schemes is currently limited, which subsequently makes it harder for the FCA to respond effectively.
The NAO has made some recommendations, which include, the FCA developing a stronger understanding of total costs and benefits of its work, formalising its approach to evaluating redress mechanisms and considering alternative approaches when deciding whether products have been mis-sold. The NAO has also recommended that the FCA and FOS work together to improve firms’ complaints handling and work with financial services firms to help consumers to access redress without using claims management companies.