Britain’s financial watchdog has been heavily criticised and told to clear a growing backlog of complaints after the number of grievances from consumers and businesses almost doubled in a year.
The Complaints Commissioner, which oversees Britain’s financial regulators, said the Financial Conduct Authority (FCA) often exacerbated the difficulties of complainants, many of who are anxious, angry and vulnerable, by delaying cases and failing to give its complaints team enough resources.
The highly critical report will add to a litany of problems faced by FCA boss Andrew Bailey who was the subject of anger at the watchdog’s annual public meeting this week.
Attendees heckled Mr Bailey for the FCA’s handling of a string of scandals including the collapse of London Capital and Finance (LCF) which left thousands of bondholders unsure if they will get their money back as NHS doctors’ surgeries wrongly sold interest rate hedging products that saddled them with huge repayments.
In one example, the commissioner said the FCA told the complainant that it's failure to properly regulate a firm accused of defrauding investors was an isolate incident. In fact, this was misleading, the commissioner said, because the shortcomings "had not been an isolated incident but reflected a significant backlog in the area concerned".
In another example, a consumer lost £45,000 after investing in a company which had been dissolved four years ago but stayed on the FCA register, giving people assurance that it was genuine and regulated. Fraudsters had set up a "clone" company with the same name in order to dupe investors.
The FCA recognised that it knew the company had been dissolved four years ago and should have been removed from the register but offered the complainant just £150 or distress and inconvenience.
“The FCA must, as a priority, complete its programme to strengthen its Complaints Team and eliminate the backlog of complaints,” said the commissioner which oversees financial regulators said in its annual report on Thursday.
The FCA’s performance has “slipped significantly” this year, the Complaints Commissioner said. The number of complaints received by the FCA jumped to 1,075 in 2018-19 from 557 the previous year. Just 14 per cent of those grievances were upheld by the FCA.
Of the 71 cases concluded by the commissioner, almost half alleged that the FCA had failed to regulate effectively.
The FCA’s poor handling of complaints disproportionately affects vulnerable consumers and small businesses, the commissioner said.
Concerns about significant alleged failures to regulate lead to long delays while enforcement action is considered, sometimes followed by a prolonged inquiry, with complainants having their complaints indefinitely deferred, the commissioner said.
In its response to the commissioner, the FCA revealed that it is deferring complaints made about LCF.