MPs disappointed by handling of PPI
THE financial regulator, the Treasury, and the Ministry of Justice, must do more to prevent and address mis-selling in the future, MPs have said.
The Public Accounts Committee (PAC) also expressed disappointment that of the £22 billion banks have paid in compensation as a result of PPI mis-selling, as much as £5 billion has ended up with claims management companies.
The PAC were also critical of the Financial Ombudsman, for taking so long to work their way through the backlog of compensation claims made through them.
Straightforward - but slow
The PAC say that despite it being "straightforward and free" for people to put in a claim via the Financial Ombudsman, in 2014-15 80% of those affected went through a claims management company.
But given that the PAC found that half of the Ombudsman's cases so far in 2015-16 have taken 15 months or more to complete, it's possible that "straightforward and free" is trumped by "quick".
While they reduced their backlog by almost half between May 2013 and November last year, it's still the case that 45% of the cases they're dealing with are more than a year old, and almost a fifth (17%) are more than two years old.
The Ombudsman have said previously that while the number of complaints they're getting about PPI are dropping, they foresee PPI making up the bulk of their work for some years to come.
Getting through the backlog is likely to be affecting how quickly they can deal with the newer cases - but even taking external factors into account as well, the PAC said the Ombudsman couldn't give a convincing account as to why they were taking so long.
For their part, the Financial Conduct Authority (FCA) haven't done enough to address the cultural issues behind mis-selling, or to ensure that customers understand the financial products they're buying.
The PAC cited the National Audit Office's recent assessment of the FCA's work, saying that the FCA "emphasises ensuring that firms adhere to detailed rules" rather than fully explaining their products to potential customers.
That also means that customers aren't always made aware of their right to claim compensation should they be mis-sold the product in question.
Then there's the fact that because the FCA don't look at the "big picture" - failing to compile and compare complaints data, for example - there's no way for either the regulator themselves, or the Treasury, to know how effective they've been in reducing the issue.
That said, the FCA are keen to draw PPI to a close - although they've been consulting on whether to do that by bringing in a deadline for claims, rather than making sure they've tackled the root causes of the mis-selling issue.
Failing to act in time
That, say the PAC, means there could be a very real danger of further mis-selling - and further issues with compensation not ending up where it should.
They say that it was entirely predictable that claims management companies would take a good chunk of the compensation funds for themselves, as similar problems had occurred with previous schemes in the past.
And when it did happen, the Treasury, Ministry of Justice, FCA and even the Ombudsman were "too slow... and too passive" in their response.
It took until March this year for the Ministry and the Treasury to publish their review of claims management regulation, and the Ministry of Justice is still consulting on restricting how much claims management companies can charge in future.
If the FCA do decide to bring in a deadline for PPI mis-selling claims, the PAC say it's entirely possible that claims management companies will step up their activities in order to make the most of the time they have left.
The good news is that even with the length of time it's taking the Ombudsman to deal with many of their cases, the deadline will only apply to the start of the claims process; whenever it's brought in, any claims that have been lodged should be seen through to completion.
Assuming, of course, that another mis-selling scandal doesn't break.
In and out of the spotlight
The Ombudsman have already seen a rise in the number of complaints they're receiving about current accounts, both packaged and frill free.
There are also concerns that the recent pension freedoms could lead to another mis-selling scandal - including the FCA, despite their insistence that pension providers give advice to those who want to access their money.
The Retail Distribution Review appears to have helped improve the standard and scope of the sales advice available, and several financial companies have told the NAO that the FCA's work has made mis-selling less likely.
But the PAC are bothered by the fact that the FCA have cancelled a review into the culture within financial services firms, which was looking specifically at how middle management are rewarded and promoted, and whistleblowing.
They say there's no guarantee "that any improvements... will stick as the regulatory spotlight moves away".