The Financial Conduct Authority (FCA)
has published the feedback it received to its call for input on
the framework for protection provided through the Financial
Services Compensation Scheme (FSCS), following concerns about
increasing costs.
The FSCS provides compensation when
certain authorised financial services firms are unable to meet
claims against them. The FSCS provides vital protection for
consumersand helps ensure confidence in financial
services.
The review was launched following
concerns about the increasing cost of compensation liabilities
falling to the FSCS, which could create a barrier to firms
entering or wishing to stay in the market, potentially affecting
the availability of some financial services. The review aims to
make sure the compensation framework continues to provide an
appropriate level of consumer protection, with costs to industry
distributed in a fair and sustainable way supporting innovation
and growth.
The main theme from the feedback was
the importance of firms improving their conduct so there were
fewer calls on the FSCS from mis sold products by failed firms.
Feedback also focused on the need for firms to be more
financially resilient to address the underlying causes of high
redress liabilities.
For the next phase of the review, the
FCA is planning to:
-
review compensation limits to
consider whether they remain at an appropriate level for
different types of claims
-
review funding class thresholds to consider whether the class
thresholds remain at an appropriate level
-
carry out consumer and firm
research, in conjunction with
the FSCS, to improve the
FCA’s understanding of the impact of FSCS protection on
consumer decision making, confidence and behaviour, and on firm
behaviour and incentives
Sheldon Mills, Executive Director of
Consumers and Competition at the FCA, said:
’We welcome the constructive
engagement and feedback which will inform the next phase of this
work.
’We want to make sure the cost to
industry for providing vital protection to consumers through the
FSCS is distributed in a fair and sustainable way – that the
polluter pays. We’re continuing our assertive action to prevent
harm from happening in the first place, which should help reduce
the levy over time.’
The FCA is already taking action to
tackle the root causes of high redress liabilities and crack down
on problem firms as part of its consumer investments strategy.
This includes:
-
being tough at the gateway to
prevent firms that could cause harm from entering the market,
with one in five firms rejected for authorisation
-
placing twice as many restrictions
on firms to prevent them from promoting or selling certain
products and services
-
using emergency powers to prevent
financial advice firms, who advised members of the British
Steel Pension Scheme (BSPS), from disposing of assets to avoid
paying compensation.
Notes to
editors
