Financial compensation payouts are to be fast-tracked under new rules announced by the financial services regulator.
The Financial Services Authority (FSA) is introducing new rules for the financial services compensation scheme (FSCS) for banks, building societies and credit unions, which will see individuals and small businesses compensated more quickly, and will ensure protection for increased numbers of people.
The fast payout rules, which come into force on 31 December 2010, will mean many individuals and small businesses will receive compensation within a target of seven days, and all payments within 20 days as required under the deposit guarantee schemes directive. The regulator believes this will greatly reduce uncertainty for consumers.
Our explains what the current compensation limits are, and how you can ensure your money is safe.
More protection for customers with loans and savings at the same bank
An additional change is that in future, if a depositor has savings and loans with the same firm, their savings will be protected to the limit of £50,000 and not used to offset loans. Currently, any outstanding loan or debt held with a firm is deducted from the amount of an individual’s or small business’ savings before compensation is paid out.
Consumer awareness of the FSCS will also be boosted by a new rule which comes into force from 1 January 2010, requiring firms to provide information on the existence of the FSCS and level of protection it offers to depositors, as well as proactively informing customers of any additional trading names under which the firm operates.
FSA: customers must feel their money is well protected
Hector Sants, chief executive of the FSA said: ‘To help underpin confidence in our banking system, individuals and small businesses must feel confident that their money is well protected. The new rules announced today will help deliver that confidence, build on the successful role of the FSCS to date, and aim to further minimise the potential hardship faced by depositors if an institution defaults.
‘The FSA, along with HM Treasury and Bank of England, have set the FSCS a challenging target of delivering payout in seven days.
‘The systems requirements that the rules introduce for banks are crucial to enable the FSCS to deliver fast payouts,’ he said.
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