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FCA proposes rules to protect customers when payment firms go bust

The UK's Financial Conduct Authority has proposed rules designed to better protect customers when payments and e-money firms go out of business.

1 comment

FCA proposes rules to protect customers when payment firms go bust

Editorial

This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community.

Use of payments firms has grown in recent years, but the FCA says it continues to see poor safeguarding practices.

Funds held by payments and e-money firms are not directly protected by the Financial Services Compensation Scheme. Instead, companies must safeguard funds which can mean customers lose money or experience delays to returns if the firm fails.

Last year, the watchdog wrote to nearly 300 payment companies warning that it was unhappy with safeguarding and wind-down arrangements within the sector. It has since opened supervisory cases relating to approximately 15% of firms that safeguard.

Now it is planning new rules that would see the existing e-money safeguarding regime replaced with a client assets (Cass) style system where relevant funds and assets are held on trust for consumers.

Firms have until 17 December to respond to a consultation.

Matthew Long, director, payments and digital assets, FCA, says: "We’re consulting on proposals to make safeguarding rules stronger and clearer for payment and e-money firms so customers get as much of their money back as quickly as possible if the firm goes out of business."

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Comments: (1)

Ketharaman Swaminathan

Ketharaman Swaminathan Founder and CEO at GTM360 Marketing Solutions

Props to FCA. As I pointed out in Bank v. Neobank: Safety Of Money In The Light Of Synapse - Evolve Fracas, many customers don't realize that their deposit in neobanks, BaaS providers and other nonbank fintechs is NOT covered by FSCS / DICGC / FDIC deposit insurance schemes if the nonbank fintech goes bust.   

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