The Public Accounts Committee has warned pension freedoms reforms are a potential trigger for future “mass misselling”.
In a report published today on financial services regulation and redress, MPs urge the FCA and the Treasury to do more to understand what misselling is happening and what regulatory measures work best to prevent it.
The committee found the cultures of firms and the nature of their sales incentives were key factors behind misselling.
It says: “The FCA has taken some action to deal with these root causes, for instance by promoting changes to firms’ incentive structures and better training of financial advisers.”
“The senior managers regime aims to get senior people to take greater responsibility for the actions of those they manage. But the risks of misselling remain, for example pensions freedoms reforms are a potential trigger for future mass misselling.”
The report points to the scrapped review into banking culture, saying the FCA has not said what culture it expects those companies to have.
It recommends the FCA should set out what action it will take to make sure firms check consumer understanding of the products they are buying and of their rights to compensation.
It suggests using real-time indicators to assess the extent of any mis-selling.
Claims management companies were also scrutinised by the committee, which called the £5bn netted from payment protection insurance claims a “failure of the system of regulation and redress”.
The committee called on the Financial Ombudsman Service to set out a public timetable for how it will manage the backlog of PPI claims by the end of July.
Committee chair Meg Hillier says: “It is vital the Government and regulators take fresh action now to better protect taxpayers’ interests, both in reducing the potential for misselling and, when it does occur, to ensure those affected get their due compensation.”
She adds: “It is deeply worrying that while the FCA has taken some action to deal with these causes, it has since scrapped plans for a review of banks’ culture – this despite it being best placed in the system to conduct such a review.
“This sends a confused message to taxpayers and will do little to reassure potential customers. Our report sets out practical measures to address this and ensure the interests of taxpayers are paramount now and in future.”