Source · Select Committees · Public Accounts Committee
Recommendation 22
22
The standard complaints-based approach to redress, which relies on consumers seeking compensation themselves, has proved...
Conclusion
The standard complaints-based approach to redress, which relies on consumers seeking compensation themselves, has proved ineffective in the BSPS case. Only 25% of members who received unsuitable advice have raised a claim with redress organisations.69 The FCA told us that it was surprised that more members hadn’t raised a complaint themselves, which highlights a clear lack of awareness of consumer behaviour and the specific vulnerabilities that prevent consumers from seeking compensation directly.70 Similarly, despite the redress process being free to use, 72% of complaints to the Financial Ombudsman and 40% of claims to FSCS were made by BSPS members through claims management companies or solicitors.71 Therefore a very small proportion of eligible BSPS members have sought compensation, and even less have received the full amount of compensation owed to them. This highlights the complex and inaccessible nature of the wider redress system and calls into question its overall effectiveness to provide compensation when things go wrong.
Government Response
Not Addressed
HM Government
Not Addressed
The FCA agrees with the Committee’s recommendation. First part of the recommendation: Implemented 5.2 The FCA’s Business Plan sets out its commitments for tackling conduct that can cause serious harm and how the organisation is joining up its tools to act efficiently, effectively, and consistently. This is exemplified by how the regulator is responding to the digitisation of financial services. 5.3 On BSPS, working in partnership with the FOS and the FSCS, the FCA has engaged extensively with former BSPS members over a significant period of time. The FCA sent direct mailings in 2018, 2019 and 2020, ran local events in 2019 and 2021, and communicated through trusted intermediaries (including steelworkers, MPs and unions), to raise awareness of their right to complain/claim. It has also provided tools, such as the FCA’s advice checker, to make it easier to do so. This engagement has been constructive. For example, 272 former BSPS members attended face-to-face events in South Wales and Scunthorpe in late 2021. 86% of attendees surveyed said they were now clearer about their next steps and following the events there was an uplift in FOS complaints. In the summer of 2022, the FCA has discussed its redress consultation directly with over 50 former BSPS members and over 200 firms. 5.4 The FCA regularly engages with industry to understand developments across the financial services industry and any emerging risks. It values its relationships with trade bodies, firms, consultants, consumer organizations and other stakeholders, who provide market insights and help us identify potential problems. We also monitor a wide range of data sources that provide insights on firms and consumer behavior, helping in our identification of emerging risks and themes. Subsequently these risks are triaged, prioritised, and fed in to forward looking work plans. The significant investment the FCA is making to become a data-led regulator set out above will assist its detection of and response to emerging risk across all financial markets. 5.5 On consumer engagement, the FCA uses a range of methods to engage with consumers and understand their experience of financial services, their needs and the potential for harm within the wider economic context. For example, the FCA’s consumer partnerships network draws in insight which informs its policy development and builds relationships and understanding with consumer groups. The FCA’s consumer market research, including the Financial Lives Survey (a nationally representative survey of UK consumers) also helps the FCA to identify harms and improve consumer outcomes. Financial Lives provides data on the characteristics of vulnerability including poor health, a life events, low resilience or low capability. 5.6 Further information on how this recommendation has been implemented is contained within letter from the Chief Executive of the FCA to the Chair of the Committee, dated 28 September 2022.