Consumers are still at “serious risk” of being mis-sold financial products, a group of MPs has warned.
The Public Accounts Committee, which oversees public spending, is urging the Financial Conduct Authority (FCA) and the Treasury to do more prevent mis-selling and to tackle the cultural problems behind the activity.
It has also criticised the process that has allowed claims management companies to make as much as £5bn from payment protection insurance (PPI) claims.
More than 12m people were mis-sold PPI and firms have paid more than £22bn in compensation to them since April 2011.
But despite consumers being able to claim compensation directly from the Financial Ombudsman, more than 80% of PPI complaints made in 2014/15 were made through third-party claims management companies.
A report by the Public Accounts Committee said: “In many cases, these companies merely package up payment protection insurance claims, but they typically charge between a quarter and a third of any compensation subsequently paid.
“The public bodies involved have been too slow in taking responsibility for this situation, and too passive in allowing it to happen.”
Committee chair Meg Hillier said: “The widespread mis-selling of PPI is a vivid demonstration of the risks facing consumers in the financial services market.
“The fall-out is still with us. Many people have waited years for a decision on compensation and, because of the way they have pursued their claims, even then they may not receive the full amount. Serious risks of further mis-selling remain.
“It is vital the government and regulators take fresh action now to better protect taxpayers’ interests, both in reducing the potential for mis-selling and, when it does occur, to ensure those affected get their due compensation.”
The committee’s report challenges the FCA to outline the actions it will take to improve the culture within banks that leads to mis-selling.
It also urges the ombudsman to set out a clear timetable to reduce the amount of time consumers have to wait for compensation decisions.
Ms Hillier, the MP for Hackney South and Shoreditch, added: “We heard evidence of some diverse causes for products being mis-sold, ranging from incompetent or intimidating sales teams to badly designed and poorly targeted products.
“It is deeply worrying that while the FCA has taken some action to deal with these causes, it has since scrapped plans for a review of banks’ culture – this despite it being best placed in the system to conduct such a review.
“This sends a confused message to taxpayers and will do little to reassure potential customers. Our report sets out practical measures to address this and ensure the interests of taxpayers are paramount now and in future.”