UK financial watchdog to beef up consumer protections
The Financial Conduct Authority (FCA) has said it will take “assertive action” against firms seeking to limit compensation for customers.
Under draft rules published today, the FCA said it would take action against firms using legal loopholes to limit payouts to customers with the regulator gearing up to take enforcement action against firms and senior managers who fail to ensure adequate compensation for customers.
“Under existing company and insolvency law, firms have options to limit their liabilities. When making use of these, they still have a responsibility to treat their customers fairly,” said Sarah Pritchard, the executive director of markets at the FCA.
“We will take action against firms that don’t meet this obligation. The guidance we are consulting on should help firms understand our expectations and ultimately help firms to avoid proposing compromises that are unacceptable to us because they fail to provide the best possible outcome for consumers,” Pritchard added.
The rule change comes as embattled lender Amigo Loans seeks approval for its latest Scheme of Arrangement to compensate customers who were given irresponsible loans.
The High Court rejected an initial compensation scheme proposed by the lender which would have seen liabilities capped at just £35m and claimants receive as little as five per cent to ten per cent of what they were owed.
Yesterday, Amigo warned that it faces collapse unless its latest customer compensation scheme, which will see the company raise £97m as part of an initial contribution to repay customers, is approved. The company’s chief financial officer has today resigned.
The FCA has itself faced criticism over attempts to quash customer compensation claims.
The FCA allegedly changed its complaints scheme as it was facing claims from savers who lost a total of £237m in the collapse of investment firm London Capital & Finance in 2019. The watchdog was investigated by the Financial Regulators Complaints’ Commissioner over the controversy with a draft report concluding the FCA covertly changed its complaints scheme “via the backdoor.”
The UK’s financial watchdog announced reform plans in November to strengthen protections for its customers by giving additional powers to senior managers and speeding up its complaints process.
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