Key Consumer Duty developments and recent communications issued by both AMI and the FCA, with commentary on implications for mortgage intermediary firms…
Following consultation, the FCA has decided to increase the ombudsman service’s award limit to £350,000 for complaints about acts or omissions by firms which take place on or after 1 April 2019. AMI has been discussing with the FCA the difficulties some firms might face in obtaining PII cover in respect of this increase in FOS compensation limits.
If your PII cover has a limit (say £150,000) then you will need to obtain new cover or have sufficient capital buffer to cover any shortfall. FCA has stated that they would expect insurers to deal fairly with these firms and urges any firms unable to secure suitable cover to contact their broker and notify the FCA as soon as possible.
Firms should also be aware that on 1st June 2019 Personal Investment Firms (PIFs) have to have PII policies that do not limit cover where the policyholder or a third party is insolvent, or where a person other than the PIF (e.g. the Financial Services Compensation Scheme) makes a claim on the policy.
All of this has come with very short notice as this was a consultation started in October 2018, closing on 21 December which was opposed by the vast majority of respondents. The PR linked to the Policy Statement published on 8 March did not properly set out to firms the potential impacts of the limit changes on their PII cover. 3 weeks to implement a policy statement is totally unreasonable where the FCA has not effectively communicated the impacts of changes.
It has become clear that this was never a consultation and that it was always the intention to implement. Indeed this has been confirmed in writing. Not in my 30 years of dealing with regulation have I seen such arrogance and lack of empathy towards the firms that the FCA regulates.
The statement sets out that it sees no link between the FOS limit and FSCS limits. However, I predict that it will not be long until this view is reversed, but we will be monitoring this closely and will hold them to their word.