FCA scraps £10,000 compensation limit
UK regulators have scrapped the £10,000 cap on compensation if they have caused a financial loss, as part of a “clearer, more transparent” complaints scheme.
The Financial Conduct Authority (FCA), the Prudential Regulation Authority and the Bank of England have finalised a revised scheme for people who have complaints about the regulators, following a consultation.
“The regulators carefully considered the responses received to their consultation,” the FCA said. “They have confirmed that they will consider making a discretionary payment in recognition of financial loss if they have made a clear and significant error, and they are the sole or primary cause of that financial loss.
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“In response to feedback, the regulators have removed the proposal that no compensatory payment relating to a financial loss will exceed £10,000, save in exceptional circumstances.”
The regulators have been under pressure to increase their accountability under the Financial Services and Markets Act 2023, following large consumer losses from investment schemes such as London Capital & Finance.
As part of the revised scheme, the regulators have also increased the levels of discretionary compensatory payments for non-financial loss and provided more clarity on eligibility, with the levels set to be reviewed every two years.
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“The regulators believe these changes balance the statutory immunity of the regulators provided by parliament against the need to make compensatory payments when at fault,” the FCA said.
However, the regulator added that “while the approach to compensatory payments has been made clearer, in practice it is expected payments made under the scheme will continue to be modest.”
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It also highlighted that the complaints scheme is not an alternative route to consumer redress for the actions or inactions of firms, directing consumers to the Financial Ombudsman Service or the Financial Services Compensation Scheme.
The new scheme comes into effect on 1 November.
