Swifter consumer redress promised in Queen’s Speech

Private investors will find it easier to make claims for compensation if measures included the Financial Services Bill, announced in today’s Queen’s Speech, become law.

Reforms in the proposed legislation include:

• expanding the remit of the Financial Services Compensation Scheme (FSCS), by giving it the power to act as an agent that can pay compensation on behalf of schemes overseas;

• streamlining the Financial Services Authority’s powers to order reviews of companies’ business practices, and secure compensation if there have been legal or regulatory breaches;

• rolling out a national ‘Money Guidance’ service, delivered by a new Consumer Financial Education Body;

• allowing a representative to bring action through the courts on behalf of groups of consumers; and

• banning unsolicited credit card cheques, to prevent financial institutions from encouraging customers to borrow more than they can afford.

Many of the proposed FSCS powers have already been used to administer compensation for savers in failed Icelandic banks.

A spokeswoman for the FSCS said: “Basically, what it refers to is the FSCS’s work following recent bank failures where we were involved in delivering compensation to customers beyond our remit – where we were paying full amounts of compensation to customers of some banks that had failed, above the £50,000 limit. We acted as agent for HM Treasury and on behalf of the Icelandic compensation scheme in relation to the Icesave default.”

Investment providers welcomed the confirmation that the new Money Guidance service, which was been trialled in north of England, was being made available to all. Ian Sayers, acting director general of the Association of Investment Companies said: “We have always said that bold action is required if we are to deliver an effective, real and lasting financial capability programme in the UK, backed up by a significant financial commitment through a levy on the financial services sector.”

However, some expressed concern over the size of the levy. “Details on funding the new body will be important as the insurance industry already contributes significantly to a range of financial education initiatives,” said Andrew Moss, group chief executive of Aviva.

Consumer groups also questioned an over reliance on the investment industry to provide advice on products. “Everyone should have access to a free and impartial national Money Guidance service,” said Peter Vicary-Smith, chief executive of Which?. “To make this happen, the new consumer education agency must have independent governance, secure funding, a lay chair and a majority of non-industry board members.”