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Mortgage broker compensation limits to hit £85k but providers will contribute

  • 30/10/2017
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Mortgage broker compensation limits to hit £85k but providers will contribute
Mortgage brokers could be on the hook for larger compensation claims under proposed changes to how the Financial Services Compensation Scheme (FSCS) operates.

However, brokers could also end up paying less in levy fees as the Financial Conduct Authority (FCA) has recommended that product providers pay 25% of compensation costs which fall to the intermediation classes.

And those advisers included in the pure protection category could also see bills fall as the regulator is proposing moving these advisers into the general insurance category, a move that has been long called for.

However, the FCA warned: “This means that they will contribute to any claims relating to Payment Protection Insurance (PPI), which are likely to spike in the next two years given the deadline and our media campaign.”

The key points being consulted upon by the regulator include:

  • merging the Life and Pensions and Investment Intermediation funding classes;
  • requiring product providers to contribute around 25% of the compensation costs which fall to the intermediation classes;
  • moving pure protection intermediation from the Life and Pensions funding class to the General Insurance Distribution class;
  • on increasing the FSCS compensation limit for investment provision, investment intermediation, home finance and debt management claims to £85,000.


The consultation paper also contains the final rules for changes to FSCS funding which were consulted on in December 2016. These include:

  • introducing FSCS coverage for debt management firms;
  • extending coverage in respect of fund management;
  • applying FSCS protection to advice and intermediation of structured deposits;
  • requiring the Society of Lloyds to contribute to  the retail pool;
  • introducing additional reporting requirements which will potentially enable the FCA to introduce risk-based levies in the future;
  • amending payment arrangements.


The consultation is open until 30 January.

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