Reading the news that the Financial Compensation Scheme’s (FSCS) levy has been revised down to ‘just’ £833m, and mortgage intermediaries will now have to contribute ‘just’ £12m, you can’t help wondering if this was the plan all along.
Announce a budget that beggars belief – over £1bn – which would be a 48 per cent increase. Suggest mortgage intermediaries will pay £22.9 million, up from the £3m they paid last year, which just so happens to be a 663 per cent increase on the previous year.
Then revise down that budget, take £10.9m off the mortgage intermediary contribution (now it’s just the 400 per cent increase) and hope the industry breathes a sigh of relief, thinks ‘it could have been worse‘ and blithely accepts it.
Perhaps I’m being overly cynical here but the facts of the matter remain – the intermediary contribution will rise £9m to £12m. And consider this, would our sector have felt similarly about such an increase if this had been the original announcement?
You’re damn right it would have, because regardless of whether it’s a 663 per cent increase or a 400 per cent increase, the underlying unfairness of a system which asks good firms to pay for bad, and at the same time asks good firms in an entirely different sector to pay for bad firms active in other sectors, still remains. A point now openly recognised by the regulator itself.
Penalties where liable
Recently the Financial Conduct Authority itself said this in a statement: “We also want to work towards a system where firms which cause redress liabilities end up paying more of the bill before recourse is needed to the FSCS.“
In other words, we want to get to a better structure where those who are responsible for the issues, problems and costs of compensation, actually have to pay for them.
Perhaps there might also be room in this reimagining of the current structure for the regulator itself to ensure less firms are responsible for these huge compensation claims. Perhaps a more robust system of authorisation, ongoing reviews and risk assessment which ensures we don’t actually get to these appalling outcomes in the first place?
Add in a focus where firms are not punished by having to compensate customers in sectors where they don’t even advise, and we might begin to have a system which is much fairer for all.
In the meantime, let’s not consider any ‘reduction‘ in these fees as some sort of victory. It’s not something to be grateful for, it’s just marginally better than the worst-case scenario we were offered a few months back.
A scenario which you might wish to assume was never likely to play out in the first place.