Financial services companies have been too slow to stop mis-selling payment protection insurance (PPI), said the Financial Services Authority (FSA).
"Progress made by firms in sorting out the issue has been disappointing," said Hector Sants, FSA chief executive.
PPI policies are supposed to provide cover if someone cannot repay loans and credit card bills because of illness, an accident or unemployment.
Mr Sants was answering questions from the Parliamentary treasury committee.
He pointed out that 20 firms had been fined about £12m, as part of the FSA's crackdown on mis-selling.