The Treasury select committee has accused the FSA of ignoring a culture of systemic misselling and tolerating endemic mispricing of mortgage endowments.
Labour MP Angela Eagle told FSA chief executive John Tiner, who was appearing on Tuesday before the inquiry on Restoring Confidence in Long-term Savings, that alarm bells should have rung over misselling.
Chairman John McFall said Tiner was “not so much sleeping on the job as comatose”.
But Tiner defended the FSA by saying that £800m in compensation had already been secured for 500,000 consumers. He said he wanted to see action at the coalface to ensure a fair deal for clients across the whole industry.
Consumers' Association senior policy adviser Mick McAteer declared a victory over the regulator, saying Tiner had been forced to admit that misselling was widespread.
The CA and the Financial Services Consumer Panel asked the select committee to force the FSA to provide accurate statistics relating to the size of the predicted shortfall in endowment maturities and a breakdown of the groups most likely to be affected.
Eagle asked Tiner: “Don't you think alarm bells should have been ringing over this kind of systemic misselling? These products were sold too cheaply, there was endemic mispricing and institutionalised misselling. It should have been somebody's job to do something about it.”
McFall said: “This evidence suggests that further misselling scandals are going to continue to dog the financial services industry if commission and fees are not changed, stamping out big up-front commission and making fees more dependent on product performance.”
Tiner said: “Our responsibilities are clear, that is why we have distributed the £800m of compensation. I think we have been very proactive and I do not think that this is at all a complacent approach.”