The Financial Services Consumer Panel has today welcomed the FSA’s response to appeals from the Panel, to plug a gap in the compensation rules. The rule change proposed by the FSA, in its Consultation Paper 165, will allow the Financial Services Compensation Scheme (FSCS) to make awards to people with claims against firms which have been dissolved for more than two years.

Some mis-selling cases take a number of years to come to light. If people discover that they may have a mis-selling claim against a company more than two years after it has been dissolved, they will now be able to pursue their claim for compensation from the FSCS. Until now, an unintended and unfair quirk in the rules has excluded these claims.

So far, this will only affect a small number of people who may have a claim stemming from the pensions review. However, as the average payout under the pensions review is £15,000, this may be a substantial amount for those affected. Also, the Panel believes there may be many more consumers in the future who will be able to benefit from this safety net.

However, the Panel is still concerned that those consumers who have a claim against a company which was dissolved before the FSCS was in existence – before 1st December 2001 – will still be unable to claim for compensation. The Panel believes there are around 500 consumers who are in this position, whose claims under the previous compensation scheme were rejected because of the same quirk in the rules. The Chairman of the Panel has today also written to the Director General of the ABI (Association of British Insurers), asking that they establish a voluntary fund to compensate the consumers who are victims of this anomaly. It is an unintended gap in the system which people have fallen into, regardless of the merit of their case.

Colin Brown, Chairman of the Panel said:
"This is something which was brought to our attention by an individual consumer, who had been unable to claim compensation because of this anomaly. The Panel has pursued this problem because, as it was affecting only a few people, it was likely to be ignored. We are pleased that the FSA has responded positively. A relatively small change to the system will have a direct impact on those consumers’ lives, and may go on to help significant numbers of other consumers in the future.

"We just hope now that the industry will close the gap completely by voluntarily providing compensation for the limited number of cases of claims from before 1st December 2001."

Notes to editors

1. The Consumer Panel’s letters to the FSA and to the ABI on this subject are available from the Consumer Panel Secretariat – 020 7066 0902 – or from the Panel’s website at www.fs-cp.org.uk.

2. The FSCS (Financial Services Compensation Scheme) is a safety net for customers of financial services firms, which has been in operation since 1st December 2001. It pays compensation if an authorised firm is unable to pay claims against it, usually because it has gone out of business. The scheme is funded by the industry and covers deposits, insurance and investments. Their website is www.fscs.org.uk

3. The FSA’s Consultation Paper CP165, sets out the FSA’s proposals for changes to the rule in Chapter 5, Proposed Amendment 1 (paras 5.7 – 5.21)

4. The Financial Services Authority (FSA) established the independent Financial Services Consumer Panel in December 1998 to advise its Board on the interests and concerns of consumers and to report on the FSA’s performance in meeting its objectives. The Consumer Panel has statutory status. The FSA must consider its representations and, if it disagrees with a view expressed or proposal made in the representation, it must give the Panel a statement in writing of its reasons for disagreeing.

5. The Consumer Panel brings together a wide range of relevant experience. This includes financial services regulation, working with vulnerable consumers, consumer protection, consumer education, front-line money advice, legal expertise, competition policy, public policy analysis, market research and media.

6. There are currently thirteen members of the Panel as listed below (for further information on individual members, see the Panel’s Web site at www.fs-cp.org.uk):-
Colin Brown (Chairman)
Ann Foster (Vice Chairman
John Howard
Vinod Kumar
Jean Gaffin
Nick Pearson
Yvonne Gallacher
Paul Salvidge
Harriet Hall
Richard Smethurst
Dianne Hayter
Jane Vass
Dave Watts

Enquiries
Media: 020 7066 0902
Publications: 020 7066 3298