FCA to review compensation limits
The Financial Conduct Authority (FCA) will review compensation limits as part of its plans to improve the compensation framework.
Following a call for input, the City regulator has published new feedback on its ongoing review of the cost and scope of consumer protection.
Currently, compensation is provided via the Financial Services Compensation Scheme (FSCS), which is funded via a levy on authorised firms.
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However, the FCA has come under fire in recent years for its handling of compensation claims, with some firms stating that the levy is too high, and could create a barrier to firms entering the market.
The review aims to make sure the compensation framework can provide an “appropriate level of consumer protection”, with industry costs distributed in a “fair and sustainable way.”
“We welcome the constructive engagement and feedback which will inform the next phase of this work,” said Sheldon Mills, executive director of consumers and competition at the FCA.
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“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 said that its main priority is helping firms to improve their conduct so that there are fewer calls on the FSCS regarding mis-sold products by failed firms. The feedback also focused on the need for firms to be more financially resilient.
The regulator will carry out more consumer and firm research alongside the FSCS to improve its understanding of the impact of compensation schemes on consumer decision making and company behaviour.
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