The Financial Conduct Authority (FCA) is stepping in to better
protect customers when payments and e-money firms go out of
business.
Use of payments firms has grown in recent years, but the FCA says
it continues to see poor safeguarding practices from firms.
Funds held by payments and e-money firms are not directly
protected by the Financial Services Compensation Scheme (FSCS).
Instead, firms must safeguard funds which can mean customers lose
money or experience delays to money being returned if the firm
fails.
The FCA wrote to payments and e-money CEOs in March 2023 about
their safeguarding and wind-down arrangements and has since
opened supervisory cases relating to approximately 15% of firms
that safeguard, to address its concerns.
Matthew Long, Director of Payments and Digital Assets,
said:
“We're consulting on proposals to make safeguarding rules
stronger and clearer for payments and e-money firms so customers
get as much of their money back as quickly as possible if the
firm goes out of business.”
Under the FCA's proposals, the existing e-money safeguarding
regime will be replaced with a client assets (CASS) style regime
designed to work with payments firms' business models. It will
also publish strengthened interim safeguarding rules for firms by
the middle of next year.
The FCA's cost benefit analysis (CBA) of its proposals has also
been subject to review by the new independent CBA Panel.
Firms can respond to the FCA's consultation by 17 December 2024.
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