Is enough being done to prevent mis-selling?

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Despite issuing fines of nearly £300 million for misconduct, and banks putting aside more than £25 billion in compensation for customers, there is "little evidence" that the Financial Conduct Authority's (FCA) actions have made real progress in reducing the overall level of mis-selling.

The NAO found that while some companies said the fines had led them to change their behaviour, it's still the case that the overall number of complaints about mis-selling has increased.

The NAO say part of the problem is that the FCA take a variety of different approaches when dealing with mis-selling, but fail to look at the big picture - for example, by compiling complaints data and information.

The NAO's Auditor General, Amyas Morse, says that transparency has also been a major issue, with UK and EU legislative restrictions limiting the auditor's access to information.

They've since asked the Treasury to remove these restrictions to help improve the FCA's accountability.

Taking action

The NAO report says that "banks' handling of complaints has been poor", requiring "ongoing action" from both the FCA and Financial Ombudsman Service.

However, while the FCA's proactive approach in tackling banks makes a welcome change from that of their predecessor - the Financial Standards Authority, widely condemned for their "light touch" approach to regulation - they still have some way to go.

The NAO say the FCA's strategic approach is "still evolving" - but the lack of a noticeable fall in the level of complaints upheld by the Ombudsman in the past five years suggests that the FCA may need to bite harder.

In June last year, the FCA issued a £117 million fine to Lloyds Banking Group for failing to handle PPI complaints fairly - but many subsequent complaints made to the bank still weren't dealt with in a way that satisfied the claimants.

Indeed, 78% of those that reached the Ombudsman between July and December 2015 were upheld.

Still a problem

The NAO say that although mis-selling to customers remains a "major problem", it could be reduced with more effective coordination between the FCA and the Ombudsman.

At the moment, the two statutory bodies often work in ignorance of each other, despite having similar aims.

The Ombudsman are already struggling to deal with the vast numbers of claims, despite having taken on more staff.

The NAO found that they have a backlog of some 40,000 cases dating back two years, which are unlikely to be cleared until 2017 - and in 2015/2016 it took at least three times as long for a complaint to be processed than in 2011/2012.

Claims deadline

The FCA have made an effort to "bring the PPI issue to an orderly conclusion" by introducing a deadline for claims to be started.

They say this will stem the flow of applications being handled by claims management companies, who charge a fee for doing something that we can do ourselves for no cost.

Indeed, Citizens Advice have previously said that 39% of people who used a claims management firm did so because they didn't realise there was an alternative.

According to the NAO, claims management companies have received as much as £5 billion of the £22.2 billion paid out in compensation by banks between 2011 and 2015, despite some of them doing "little more than passing batches of consumer complaints on to the Ombudsman".

Warning signs

The FCA say that we're on the brink of another mis-selling scandal - this time relating to last year's pension reforms.

They've been praised for taking an "active approach" in identifying and responding to the risk before it becomes a major problem.

But the NAO say that the FCA get too bogged down in obtaining masses of data with "no clear purpose" - and draw attention to the fact that more than a third of the FCA's staff have "less than two years'" service at either the FCA or their predecessors, the FSA.

This has made tasks like supervising financial firms difficult, as staff are lacking the experience to fully handle their roles - and, the NAO adds, this perceived lack of experience may have damaged confidence in the regulator.

If mis-selling is ever to be significantly reduced, the NAO say that the FCA need a better understanding of the different ways in which we can be harmed by it.

That, they say, will require the FCA to develop ways of estimating the potential for harm by through a variety of measures - from looking at anti-competitive behaviour through to the effects of misconduct on particular groups of people.