MPs demand FCA mis-selling crackdown

MPs demand FCA mis-selling crackdown

An influential group of MPs has issued a damning report into the financial services sector, branding the risk of customers being mis-sold products as “substantial and continuing”.

The Public Accounts Committee’s report into the mis-selling of financial services also criticised the Financial Conduct Authority (FCA), stating it must do more to ensure consumers understand the financial products they buy.

It called on the Government and regulators to “take fresh action now” to stamp out abuses.

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Meg Hillier, chairman of the committee, said the widespread mis-selling of PPI was a “vivid demonstration” of the risks facing consumers in the financial services market.

She added: “It is vital the Government and regulators take fresh action now to better protect taxpayers’ interests, both in reducing the potential for mis-selling and, when it does occur, to ensure those affected get their due compensation.

She called the FCA’s decision to scrap plans for a review into banking culture “deeply worrying”, as the regulator was “best placed in the system to conduct such a review”.

The FCA told the committee it welcomed innovation in new products, for instance in the pensions market in order to provide greater choice to consumers who do not want to buy an annuity.

But the MPs said product innovation can also make mis-selling more likely, particularly if products are especially complex.

The committee also stated that HM Treasury and the Ministry of Justice should report publicly on the effectiveness of their actions in reducing the role of claims management companies in payment protection insurance (PPI) compensation.

The Treasury and the FCA should also demonstrate how they will ensure these problems do not happen again with future schemes, it added.

Simon Evans, chief executive of the Alliance of Claims Companies, expressed disappointment in the report’s conclusions, stating it made a fundamental misunderstanding of the process for reclaiming mis-sold PPI.

He said: “The real scandal here is the scale of the mis-selling, and the continued resistance of banks and others to properly compensate consumers in a timely fashion.”

Adviser view

Steve Carlson, a chartered financial planner at Cardiff-based Carlson Wealth Management, said: “The amount of detail that needs to be done for compliance pushes up the cost of advice. In order to make advice more affordable, we need to cut down on the regulation and paperwork so people can get advice they understand.

“I send out suitability reports which are 30 or 40 pages long, and I know they are not going to read them.”