In a report published Wednesday; entitled, ‘Financial services mis-selling: regulation and redress’, the NAO also suggested the regulator cannot be confident about the cost-effectiveness of its methods of handling mis-selling complaints.
The NAO report found in 2014, mis-selling accounted for 59% of all customer complaints to financial services firms, compared with 25% in 2010.
Amyas Morse, head of the NAO, said: “Mis-selling of financial products remains a major problem for Britain’s consumers. The regulatory and redress bodies have increased the prominence of mis-selling issues in financial service firms and £22bn ($28.1bn, €31bn) has been paid out in [payment protection insurance] compensation since 2011.
“Legislative restrictions limit my access to information that the FCA holds on firms making it impossible to draw definitive conclusions on its approach.”
No cross-reference
One area identified by the NAO as an issue is the failure of the FCA to cross-reference the complaints data with proof of the measures it has taken to reduce mis-selling, according to the NAO.
“Gaps in the FCA’s overview of mis-selling create a risk that its interventions may not be well coordinated, and means that the FCA cannot be sure that it has chosen the most cost-effective way of intervening,” it said.
Morse said: “The information my staff could see, such as customer complaints, does not show any clear reduction in the extent of mis-selling. The FCA cannot be confident that its actions are reducing the overall level of mis-selling, and it has further to go to show it is achieving value for money.”
FCA holds its hands up
In response to the report, which considers the role of the FCA, FOS, FSCS and HM Treasury in the management of mis-selling cases, the UK watchdog said it accepted the findings.
“The report recognises that the task of reducing mis-selling of financial services cost-effectively is a difficult one and we welcome the NAO’s conclusion that FCA action including thematic work, changes to inducements, increased fines and redress payments appear to have substantially reduced financial incentives for firms to mis-sell products.
“It is unlikely that mis-selling could ever be eliminated completely. Our aim is to avoid and minimise it as far as possible, create the right incentives and culture in firms, and to ensure appropriate redress for consumers and regulatory penalties for poor conduct are put in place when it occurs.”
