‘I feel the anger over failed compensation claims’

Each day an increasingly large pile of letters finds its way to Caroline Rainbird’s desk. She is head of the Financial Services Compensation Scheme (FSCS), which receives thousands of claims every day from consumers who have lost cash when the financial institutions that hold their money have collapsed.

The lifeboat fund paid out £473m in compensation to 425,760 claimants in the last tax year and has seen a sharp rise in the number of new cases since

Ms Rainbird took charge eight months ago. Many claimants choose to write directly to Ms Rainbird, who works from the FSCS’s unassuming offices in the City of London. “It’s heartbreaking sometimes when I read these letters,” she said. “Often our customers are vulnerable, they’re upset and angry, confused and worried. People have lost their life savings.”

As well as firms going bust, consumers can lodge a claim if they have been given bad financial advice on their investments or pensions, but crucially are not reimbursed if their loss is because of poor performance of the investment itself.

This would seem to be a clear delineation, but the lifeboat scheme has found itself in choppy waters as a growing number of people have tried to claim for losses outside its remit.

One issue occupying more of Ms Rainbird’s time than any other is

Caroline Rainbird at the FSCS headquarters in London

London Capital & Finance (LCF), a failed provider of unregulated and highly risky “mini-bond” investments.

Almost 12,000 people lost a collective £236m when the firm collapsed last year, shortly before Ms Rainbird took charge at the FSCS.

“On the face of it this was a minibond, which wouldn’t normally be eligible for compensation,” she said. “But we were alerted that there were some question marks, and our team started to review cases.”

As mini-bonds are unregulated investments, buyers would not typically be able to make a claim. But in some instances, such as if investors were given inappropriate financial advice, LCF customers could be eligible. The key task now is for the FSCS to decide which investors were badly advised by LCF and associated companies, and which were merely told incorrect information. While this

The FSCS lifeboat fund has paid out millions, but critics say this is not enough. Adam Williams meets the woman in charge