FCA works towards better protecting consumers when payment companies shut down

Even if the regulatory body provided this information to firms, the FCA found their response and the action taken unsatisfactory, which in turn led to the opening of supervisory cases relating to nearly 15% of companies that safeguard. At the time of the announcement, the Financial Services Compensation Scheme (FSCS) does not protect funds held by payments and e-money firms, instead, this action must be taken by companies. This can lead to consumers losing funds or experiencing delays when it comes to returning them if the firm goes out of business.

When commenting on the news, representatives from the FCA mentioned that the regulator is currently considering proposals to make safeguarding rules more solid and clear for payment and e-money companies so that customers receive as much of their money back as possible if the company ceases operations. Additionally, being committed to minimising the risk for consumers, the FCA intends to replace the existing e-money safeguarding procedures with a client assets (CASS) style regime developed to work with payment firms’ business models. The regulator aims to publish strengthened interim rules for firms by the middle of 2025. As per the information detailed in the press release, the FCA asked for all responses to the consultation by 17 December 2024.

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