All banks, building societies and credit unions will be required to display comprehensive information to consumers regarding the deposit protection schemes which applies to their money should the company go bust. These new regulations have been introduced by the Financial Services Authority (FSA) to help enhance consumer confidence.
The FSA are an independent, non-govermental establishment overseeing the regulation of financial services within the United Kingdom. Following encouragement from the FSCS (Financial Services Compensation Scheme), they have announced that stricter regulations will be introduced to help protect consumers’ money.
From 31 August 2012, it will be a legal requirement for financial establishments to have prominent posters outlining the relevant compensation schemes to their consumers’ deposits. Such information will also need to be displayed clearly on their websites.
Since 2001, The FSCS has paid out of £26bn has been compensated to people with around 4.5m helped by the organisation. They work as a ‘last resort compensation fund’ for consumers of authorised financial services offering compensation when companies have stopped trading. The service is independent and impartial and free for consumers to use.
Mark Neale, Chief Executive of the FSCS said:
“The banking crisis shows how important it is for consumers to have clear information about FSCS protection. We never again want to witness the run on a bank because people do not know their money is protected. Since then, the industry has improved the quality of information it gives to consumers about FSCS.”
Consumers could be protected for up to £85,000 of their money. The publications will also outline that FSCS protection is limited to customers of UK banks and building societies but they will also explicate the procedures neccessary for those with finances in UK branches of banks based in the European Economic Area (EEA).
Andrew Bailey, FSA Director of UK banks and building societies said:
“Too many people assume that because their branch is located on a local high street in the UK, they are covered by the FSCS. This is not true for UK branches of EEA banks where the home country’s deposit guarantee scheme applies.”
“Banks, building societies and credit unions will have to display these compensation stickers or posters in the branch window along with a sticker at the cashier’s window or desk and a further poster in a prominent position inside.”
The FSCS recently launched a £4m advertising campaign in order to promote their services. However due to dissatisfaction with the results of the awareness raised from the campaign, they urged the FSA to do more to promote their services.
Mark Neale stated:
“It [the FSA] needs to do much more to provide clear, accurate information about the protection we provide. This is essential...and is not limited to deposits.”
"We have been working with major firms in a bid to get them to go the extra mile in building awareness of the Scheme. We are grateful for their support and hope they will lead the way. We encourage all banks, building societies and credit unions to have a sticker on display, posters and information in branch and on their web sites. Go the extra mile. Tell consumers about FSCS. It is good for consumer confidence. And that is good for the industry too."