Efforts to reform how consumers and small businesses complain to the Financial Conduct Authority (FCA) have come under fire.
On the last day available to submit feedback on the consultation; the True and Fair Campaign, led by activist and entrepreneur Gina Miller, strongly criticised attempts by the FCA, Prudential Regulation Authority and Bank of England to change the way compensation is given to consumers who lost money.
Under the proposals, investors would only be able to get back up to £10,000 ($12,870, €10,977) from the regulators in case of financial loss.
International Adviser reached out to the FCA, but was not able to determine what the current limit for redress under the Complaints Scheme is, in time for publication.
‘Flagrant breach’ of law
But the proposal limits the scope of compensation as well.
Under point 4.10, the consultation paper puts forward that the regulators “would consider making a compensatory payment only where adequate documentary evidence of the loss has been provided, and the following further conditions have been met: we are the sole or primary cause of the loss; and there has been a clear and significant failure by us”.
The True and Fair Campaign strongly criticised both the wording and the regulators’ attempts at changing the current scheme, as it claims the proposal is “unfair, immoral and illegal”.
“Not only does the proposed scheme contravene the Financial Services Act 2012, it fragrantly breaches one of the FCA’s five regulatory objectives under the Financial Services and Markets Act 2000, namely ‘the protection of consumers’.
“It also flagrantly breaches one of its own three operational objectives, ‘securing an appropriate degree of protection for consumers’.”
Making things more difficult
This is because the campaign claims that “almost certainly” the watchdogs will never be the primary or sole cause of financial loss to investors, as it would most certainly be the misconduct of a third-party firm or individual rather than the actual regulator.
The campaign added: “This consultation is highly damaging to the credibility of the FCA as a fit and proper regulator in terms of consumer protection, not just due to the sly manner in which it has been undertaken, or the proposed setting of arbitrary compensation caps, but the fact that the qualifying requirements for claims would be nigh on impossible for claimants to ever meet.”
Gina Miller said: “The proposed reforms to the compensation scheme amount to the FCA blatantly attempting to close the door on all future compensation for financial loss suffered by victims where regulatory failure by the FCA has contributed to their loss.
“The rush to undertake and conclude this consultation before publication of three major independent reviews, likely to detail the FCA’s failures in scandals that resulted in millions of ordinary consumers suffering financial loss, is highly suspect.”
Miller’s husband and co-founder of SMC Direct, Alan Miller, added: “It begs the question of who signed off this proposal for a new compensation scheme that materially limits the eligibility of complaints; and whether this person should consider their position within the FCA?”
The consultation was opened on 20 July 2020, less than a month after the Treasury Select Committee criticised the FCA’s handling of complaints as “troubling”.