In January the Financial Services Authority (FSA) published its final guidance on mis-selling mortgages based on its findings in 2012.
This is thought to be an attempt by the regulator to crack down on the mis-selling of products to the public which affect many people throughout the UK.
The FSA has reviewed the activity of twenty two authorised financial firms in recent years, the authority discovered that a worrying 20 of the 22 firms had been involved in schemes that increased the risk of mis-selling products to the public.
A couple of these cases indicated serious risks, though surprisingly only one firm of the twenty two was referred to the authority’s enforcement and financial crime division.
The risk element refers to specific incentive schemes, these schemes are thought to go against what the FSA has been trying to crack down upon in recent years. The FSA was created with customer satisfaction in mind and several products sold to the public have been suggested to be unsuitable.
Incentive schemes are thought to be a major problem, with financial firms’ staff being awarded for every potential sale in the retail division. The sales teams and financial advisers in several banks have essentially been encouraged by financial services to misinform customers in order to sell them unsuitable products.
The FSA has made it clear that it will monitor how firms act as far as guidance is concerned and it has the authority to take action against those who deliberately misinform customers.
Unless financial firms take the initiative and respond to the guidance set out by the FSA they risk facing punishment by the regulator.
This guidance does not indicate specifically how staff should directly deal with customers transactions but it does suggest that incentive schemes deployed by financial firms have the potential to mis-inform and mis-sell products to customers.
Financial firms encourage financial rewards for marginal sales and performance based salaries for its staff, which is thought to be a major part of the problem.
Judging by the information published in the review it is supposed that there are many candidates within financial services and banks that could be targeted by the FSA in the future.
In an environment where employees are desperate to sell, the likelihood of mis-selling mortgages becomes increasingly likely, some staff working in the retail division of a financial service are paid entirely on the sales they make, rather than a base salary.