The Financial Conduct Authority (FCA) has set a goal of spotting problem firms faster to help tackle the high Financial Services Compensation Scheme (FSCS) levy.
It is developing proposals to improve complaints reporting so it can spot issues earlier and ensure failing firms are more likely to bear more of the costs currently passed on to other regulated firms through the FSCS.
The objective features in the regulator’s Business Plan for 2023/24 in which the FCA said it wants to “make sure that consumers can get appropriate and efficient redress when things have gone wrong”.
It added that “too many firms fail owing redress to consumers. We want to see more consumers get redress from the firm that owes them money so that a smaller proportion of the costs are passed on to other regulated firms.”
The objective builds on last year’s plan in which the FCA said in order to make the redress framework fairer, it wanted to see more consumers get redress from firms that owe them money.
While acknowledging a steadily decreasing FSCS levy in recent years, the regulator conceded that “there are a number of existing liabilities in the pipeline which mean some costs are likely to have been pushed into the coming year”.
In order to tackle the issue the regulator set out a number of outcomes it wants to achieve, including:
- ensuring the redress system delivers “timely and fair” complaint resolution and compensation to consumers;
- that firms that create a redress burden are more likely to bear the associated cost themselves;
- that consumers understand the redress system and how to access it;
- and that the Claims Management Company (CMC) sector delivers fair value.
To achieve these outcomes the regulator committed to starting a number of activities in 2023/24 including consulting on guidance for firms on redress calculations, reviewing its rules on access to the Financial Ombudsman Service for small and medium sized enterprises, and being innovative in how the it regulates to help it intervene more assertively.
These are in addition to the proposals for improved complaints reporting.
The regulator added it will consider whether the compensation limits remain appropriate, review the funding class thresholds and conduct research to further its understanding of the impact of FSCS protection on consumer decision-making, confidence and behaviour and to provide evidence about the appropriate scope of coverage.
Over the next financial year, the regulator also committed to continuing embedding the wider implications framework, launched in January 2022, working with regulatory partners to tackle common issues to prevent harm and ensuring the redress system delivers “timely and fair” resolutions.