The Financial Conduct Authority (FCA) has rejected the possibility of a no claims discount to its annual fees for firms which have no complaints upheld by the Financial Ombudsman Service (FOS).
It also dismissed a suggestion to move towards a ‘polluter pays’ style of charging which would see those firms responsible for the greatest burden on the regulator and industry.
The suggestions were made by respondents to the FCA’s fees consultation in April and were published as part of the PS 22/7 policy statement which confirmed how much advisers would be contributing this year.
Intermediaries in the health and protection market face an increase of 3.5% in the fees they will be paying to the FCA, despite the regulator only increasing its funding requirement by 2.8%.
In the policy statement, the FCA noted there were some suggestions it should revise its approach to fees to take account of sub-standard behaviour.
“For example, introducing the equivalent of a no claims discount, factoring in the number of complaints upheld by the Financial Ombudsman Service or moving towards a ‘polluter pays’ approach,” it said.
However, the FCA and noted it had previously considered linking fees to performance and rejected this as being too complex.
“The overwhelming majority of firms are compliant and we believe it would be disproportionately costly to administer fairly and consistently,” the FCA said.
“For example, few firms would have all or none of the complaints against them upheld by the FOS so we would have to devise a form of weighting and possibly factor in a more qualitative assessment of the seriousness of the complaints to strike a balance between, say, a firm with several relatively minor technical breaches against a firm with a single case of wide-ranging consumer harm.
“Apart from the administrative expense, any charging system based on performance is likely to increase the number of challenges to invoices,” it added.
One respondent cited the lower consumer risks presented by mutuals compared to many banks and repeated earlier suggestions that building societies should be decoupled from the deposit takers fee-block.
This too was dismissed by the FCA which said it had considered the matter and explained that fee-blocks group firms together that carry out common permitted regulatory activities and no account is taken in other fee-blocks of the differing risk profiles of sub-groups of firms or individual firms.
‘Ironic’ lack of flexibility
As part of the April consultation the FCA proposed removing extended payment terms on invoices sent to firms.
While some respondents were happy with this, others disputed it and one commented that it was ‘somewhat ironic’ for the FCA to take a rigid approach while expecting regulated firms to show flexibility towards their own customers
It was argued that extended payment terms should be considered where there were reasonable grounds given the current economic climate with significant inflationary pressures and an overall increase in regulatory costs.
However, the regulator again rejected this, saying that extended payment terms result in additional administration, adding time and costs to the fee collection process and systems maintenance.
“These costs are passed on to other fee-payers, so we are not maintaining this concession,” it said.
“If a firm faces genuine difficulty over the timing of its invoice, we encourage early engagement with our fees team.”
