Financial Services Regulations – Do they protect individuals and businesses?
Recently there has been a significant amount of focus on consumer protection in the Financial Services Regulatory sector. At the heart of this lies the need for individuals and businesses have access to remedies when things go wrong, without having to resort expensive court action.
We now see that more individual bank customers, micro businesses, and more small and medium-sized enterprises (SMEs) are going to fall within frameworks set out by the regulatory bodies who oversee banks, insurers, pension providers and other financial services institutions.
The key recent announcements are:
- The Financial Ombudsman Service to be extended to more SMEs – the rules are being relaxed on which businesses can qualify for the free-to-use ombudsman service. Now those with an annual turnover below £6.5m and fewer than 50 employees will be eligible to use the service. As a result the clear majority of SMEs should be eligible. Maximum award is also set to increase from £150k to £350k.
2. Voluntary code to compensate victims of payment fraud – this is an initial draft code published by an industry steering committee on fraud. The broad principles are that the code seeks to reduce payment frauds (which have significantly increased in the last year) and compensate those who have been scammed. The aim is to put in place a formal scheme in early 2019.
Regulatory change is far from straight forward and shouldn’t be made lightly; so it is inevitable that it will lag behind the needs of consumers. That said, it appears that real strides are now being made.
I welcome this continuing shift as an important and healthy re-balancing of the risk between large financial institutions and their customers. In short, banking errors or fraud can decimate the finances of a consumer, but with proper budgeting can be absorbed by most financial services providers.
I would add a note of caution, however, as the changes will only make a difference if those affected are aware of their rights – a point I’d be glad to discuss, so do not hesitate to get in touch