British MPs have warned that a new mis-selling scandal could be brewing in the UK's financial industry following the introduction of the pension freedoms last year.
The Public Accounts Committee (PAC) described the pension freedoms, which allow over 55s more choice on how they control their pension pots, as a "potential trigger" for a mis-selling scandal of similar size to that related to payments protection insurance (PPI).
"The risks of mis-selling remain, for example pensions freedoms reforms are a potential trigger for future mass mis-selling", the report stated.
"The Financial Conduct Authority has withdrawn a planned review of banks' culture, but has not articulated what culture it expects firms to have. There is no guarantee that any improvements in cultures will stick as the regulatory spotlight moves away."
The committee also highlighted a systematic failure in the compensation process to the victims of mis-selling. Claims management firms have earned up to £5bn ($7.2bn, €6.4bn) in PPI payouts, earning £1 for every £4 recuperated, which the PAC described as a "failure of the system of regulation and redress".
The PAC stressed the compensation could have and should have been paid to those who were affected by the mis-selling scandal instead.
"The widespread mis-selling of PPI is a vivid demonstration of the risks facing consumers in the financial services market," said PAC chair Meg Hillier. "The fallout is still with us. Many people have waited years for a decision on compensation and, because of the way they have pursued their claims, even then they may not receive the full amount. Serious risks of further mis-selling remain."
Since April 2011, firms have paid more than £22bn in compensation to the more than 12 million customers who were affected by mis-selling. Customers can make a complaint to a firm for free, or they can opt to do so via a claim management company, which will normally retain between a quarter or a third of the compensation payout.
Customers who remain unsatisfied can then turn to the the free Financial Ombudsman Service (FOS), which aims to resolve issues between consumers and financial companies. However, while the report found it was "straightforward and free" for customers to turn to the ombudsman, 80% of the claims submitted in 2014-15 were made via through claims management firms.
The PAC added that: "In many cases, these companies merely package up payment protection insurance claims, but they typically charge between a quarter and a third of any compensation subsequently paid [...] the public bodies involved have been too slow in taking responsibility for this situation, and too passive in allowing it to happen."
The committee also warned about the ombudsman's backlog of cases, indicating 45% of open cases were more than a year old, while 17% (39,300) were more than two years old. So far in 2015-16, 50% of PPI cases have taken 15 months or more to close.