The Financial Services Consumer Panel (FSCP) has hit out at the Financial Services Authority (FSA) for a "record of procrastination", and has called on it to take immediate action against firms whose incentive schemes are to the "detriment of consumers".
The FSCP is an independent statutory body set up to represent the interests of consumers in the development of policy for the regulation of financial services.
The regulator has a "past record of procrastination... the production of streams of analysis and guidance combined with inaction that allowed bad industry practices to go unchecked for years", it said.
The FSCP also blasted firms for "failures" that made the consultation paper on incentives necessary in the first place.
"It is a mark of firms' failures that the FSA finds it necessary to give guidance on good and bad practice, much of which should be self-evident to any successful firm that seeks to act in its customers' interests," the response says.
The FSA consultation follows a review by the regulator across a variety of authorised firms - including banks, building societies, insurance companies and investment firms.
It found incentive schemes with high risk features and the potential for sales staff to earn significant bonuses but few effective systems and controls in place to adequately manage the increased risks of mis-selling arising from their incentive schemes.
The FSCP added: "While we think this guidance is helpful, we believe it is essential that the FSA does not fall into the trap of using it as a substitute for swift and effective supervision and enforcement.
"It is thus dispiriting to read that two years after its study of misaligned incentives began the FSA is still undecided whether it should change or strengthen its rules.
"The FCA seeks to be a bold, pro-active regulator. It should take action now against financial firms whose incentive schemes are to the detriment of consumers."
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