The Financial Ombudsman Service says FSA fines have been ineffective and the Financial Conduct Authority needs to consider other forms of enforcement action.
Speaking to the Parliamentary Commission on Banking Standards last week, FOS chief executive Natalie Ceeney said she wants the FCA to act with greater transparency, award quicker redress and force firms to offer compensation.
She said: “One of the problems of the past is to respond to a failing at a company with a fine. For many, it is simply a small cost of doing business and the profits from continuing can be far in excess of the fine.
“We have been public about using enforcement action to put things right by enforcing proactive compensation or forcing firms to write to customers for proactive redress rather than waiting for individuals to complain. There is increasing use of it by the FSA and fines are not the only answer.
“We cannot simply wait until people complain, they will often complain many years after the event. Some indications that the FCA will look at business models, incentive schemes and penetration rates seem to be absolutely right. It is the right direction of travel.”
Ceeney said she hopes the FCA will be transparent and build public support for its actions.
She said: “I hope the FCA will be transparent and harness public attitude to help change. The tools are there but whether it helps depends on whether they are used.”
Facts and Figures Financial Planners managing director Simon Webster says: “The fining system is disproportionate, unreasonable, unfair and unfit for purpose.
“The only people who pay fines are shareholders and policy holders not the individuals who made decisions.”