Investors wronged by a financial firm in line for twice the payback
Pensioners and investors left worse off by the sharp practices of professionals trusted with their money can expect a significant improvement in their financial protection.
City watchdog the Financial Conduct Authority (FCA) plans to increase the compensation limit for consumers where a financial company has cost them their savings.
Complaints should go to the Financial Ombudsman Service (Fos), which has the power to decide your case and award compensation with the aim of putting you back in the situation you would have been in had you not been wronged.
Currently the service can only award up to £150,000 – often much less than investors have lost. It can tell the offending company to pay more than this limit, but cannot force it to do so.
The FCA has proposed more than doubling this limit to £350,000. People who successfully complain to the Fos about problems occurring on or after Apr 1 2019 would be entitled to the higher payback limit.
For complaints about problems that happen before Apr 1 2019, and which are referred to the Fos after that date, they would be in line for compensation of up to £160,000. From Apr 1 2020, both limits would increase in line with inflation.
However, for consumers who refer complaints to the ombudsman service before Apr 1 2019, the limit will remain at £150,000.
Generally, consumers can bring a complaint to the Fos within six years of the event they are complaining about or, if later, within three years from when they could reasonably have known they had cause to complain. It must also be within six months from the business sending the consumer a final response.
The FCA is consulting on the changes and has said it will report back on its decision in the new year.
Its analysis suggested there could be around 2,000 complaints upheld by the service each year where the appropriate compensation is above the current award limit.
If firms do not volunteer to pay compensation above the limit, complainants could be suffering financial harm of around £113m per year.
Treasury committee chair Nicky Morgan has criticised the handling of complaints