You are here: Home - Saving & Banking - News -

Banks encourage mis-selling of products says watchdog

0
Written by:
05/09/2012
The Financial Services Authority said it wants banks to clamp down on bonus schemes that encourage mis-selling of financial products.
Banks encourage mis-selling of products says watchdog

A review by the FSA uncovered regular examples of incentive schemes that resulted in customers being sold products they did not need or could not use, to boost the earnings of sales teams.

The report, which looked into banks, building societies, insurers, and investment firms, uncovered a range of serious failings which the watchdog wants to tackle.

It found incentive schemes were likely to drive people to mis-sell and these risks were not being properly managed.

It also revealed firms failing to identify how incentive schemes might encourage staff to mis-sell, suggesting they had not properly thought about the risks or simply turned a blind eye to them.

Martin Wheatley, managing director of the FSA, said he wanted to work with firms to stop the practise but warned new rules could be imposed if they didn’t clean up their act.

“This bonus-based approach has played a role in many scandals we have seen over the years,” he said.

“Incentive schemes on payment protection insurance (PPI) were rotten to the core and made a bad problem worse.”

Banks are currently paying out around £9bn in compensation to borrowers who were mis-sold PPI.

The review found numerous types of poorly managed incentive schemes, including one firm that operated a ‘first past the post’ system where the first 21 sales staff to reach a target could earn a ‘super bonus’ of £10,000.

Basic salaries for sales staff at another firm could move up or down by more than £10,000 per year, depending on how much they sold.

“Today marks the start of a programme of work to reduce these risks,” Wheatley told an audience of senior bankers, compliance officers, trade and consumer groups on Wednesday.

“This will involve further supervisory work, a wider review of incentive schemes, enforcement proceedings, and a possible strengthening of our rules.”

Wheatley said the work would continue when the FSA is replaced by the Financial Conduct Authority and Prudential Regulation Authority in 2013.

Tagged:

Tag Box

Debt

Pension

Spending

Financial fitness

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Are you a first-time buyer looking for a mortgage?

Look no further, get the help you need by searching for your perfect mortgage

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

The essential Your Money guide to the April 2018 tax changes

As we head into the 2018/19 tax year, a number of key changes take place to existing policies while some new i...

A guide to switching energy provider

All you need to know about switching from one energy supplier to another.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

YourMoney.com Awards 2018

Now in their 21st year, our awards recognise the companies offering the best products and services to consumers

Money Tips of the Week

Read previous post:
2203024-supermarket
Food prices set to bottom out

British shop price inflation picked up slightly in August, to a 1.1% year-on-year rate, according to the latest data released...

Close