The Financial Conduct Authority (FCA) has assured MPs that pension reforms won’t be the next PPI.
Interim chief executive Tracey McDermott told the House of Commons Pubic Accounts Committee that lessons have been learned from the way PPI was handled.
The committee started their inquiry into how the financial community as a whole has handled ‘mis-selling, regulation and redress’ by asking Ms McDermott about the regulator’s handling of the PPI scandal.
Asked about the role of claims management companies she said that a lot of people had chosen them rather than deal with the claims themselves because they were not confident the banks would deal with their complaints.
She added that paperwork showing PPI charges was not always easy to locate and the claims management companies did the searches.
Asked why the FCA had not forced the banks to write to all their customers who had been mis-sold PPI, she said that was ‘not practical.’
“We had to ensure people who had been mis-sold got the compensation … we had to encourage the right people to claim,” she said.
Ms McDermott also mentioned the on-going consultation regarding a proposed PPI claims deadline, saying a two year deadline would help bring closure for the customers and the banks.
In a previous statement the FCA had declared its support for the idea, saying: “The FCA now considers there is a case for intervening further in PPI and that introducing a deadline and running a communications campaign would:
- Prompt many customers who want to complain, but have not yet done so, into action, resulting in them potentially getting redress sooner and giving some of them the opportunity to pay off costly debt.
- Bring the PPI issue to an orderly conclusion, reducing the uncertainty for firms about long term PPI liabilities and helping rebuild public trust in the retail financial sector.”
‘Fiddling while Rome burns’
Labour MP Chris Evans accused both the government and the FCA of ‘fiddling while Rome burns,’ particularly in connection with pensions mis-selling.
Asked if there was the possibility of another mis-selling scandal she said the FCA had tried to reduce the level of risk, but that it could not be completely stamped out.
She said: “Fundamentally there will always be a risk that there will be some mis-selling in any product that involves advice and sales. What we are trying to do is ensure that it is at a level that is minimised.”
She added that the FCA had done ‘a significant amount of work’ to prevent pension savers being ripped off.
Committee members wanted to know what safeguards were in place to stop mis-selling under the new pension reforms, which allow people more freedom with their pension savings.
Ms McDermott 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 mis-selling scandal,” she added.
- The current chief executive of the Prudential Regulation Authority (PRA) division of the Bank Of England, Andrew Bailey, will take over as boss at the FCA in July.