Two of the Treasury’s most senior civil servants have admitted the Government should have moved faster to clamp down on claims management companies.
The National Audit Office reported last week that CMCs had gained up to £5bn from claims handled by the Financial Ombudsman Service.
Regulation of CMCs is currently handled by the Claims Management Regulator which operates under the Ministry of Justice, although a review is in process to examine the future of regulation of the sector, including whether charges should be capped.
And at a hearing of the Public Accounts Committee yesterday, MPs questioned whether the Government could have moved earlier to prevent money being siphoned off by CMCs.
HM Treasury director general Charles Roxburgh, described the comments from MPs as “a good challenge”, while second permanent secretary John Kingman admitted: “With the benefit of hindsight it is clearly the case that the work we are doing now, no doubt it would have been better if we had acted sooner.”
Labour MP and committee member Chris Evans accused the Government and the FCA of “fiddling while Rome burns”, in particular relation to misselling in the aftermath of the pension freedoms.
However, acting FCA chief executive Tracey McDermott said the regulator had carried out a significant amount of work to prevent pension savers being ripped off.
She said: “The most immediate things that we have done were in the short term. When the freedoms came in we introduced new rules requiring firms to give what we call retirement risk warnings, which cover things like issues around health, around scams, around dependents, around tax and so on.
“We have been very focused, and indeed the industry is very focused on the fact that this cannot become another misselling scandal.”
However, McDermott warned shifting regulatory focus to products, rather than individuals, risks stifling the market.
She said: “That would be a massive shift of emphasis for the organisation and it would be something that parliamentarians would want to debate. There is a real downside risk of pre-approving, in that you actually quell innovation.”