The Financial Services Compensation Scheme (FSCS) received 25% more complaints in 2010-11 than it did the previous year, according to its annual report – with the failure of Keydata Investment Services Limited a key reason for the rise.
The FSCS received almost 39,500 new claims from consumers last year, and also dealt with 75% more enquiries – 167,000 in total. The collapse of Keydata dominated the FSCS’s work, with the Scheme resolving more than 27,000 claims arising from the firm’s failure and paying out £214m to its investors.
During the course of 2010-11 the FSCS paid out £535m in compensation to consumers, while also working to ensure claimants received their money more quickly than in previous years.
It is now a legal requirement that people are compensated within 20 days of a deposit taker failing – but the FSCS’s own target is to pay consumers back within seven days of the collapse of a bank, building society or credit union. Following the defaults of three credit unions in January 2011, the FSCS paid the vast majority of members within 48 hours and the balance of straightforward claims within seven days. You can read more about how the FSCS works on the Which? website.
PPI claims on the rise
According to the FSCS’s report, 2010-11 also saw a rise in the number of payment protection insurance complaints submitted by consumers. These accounted for around 20% of new claims, and the FSCS says it expects to receive ‘a continuing high volume of PPI complaints in 2011-12.’
PPI has long been the focus of controversy, and in May the British Bankers Association decided not to appeal a high court decision that would force it to continue handling complaints and compensate consumers appropriately. (You can find out more about PPI reclaiming in our online guide.)
However, some PPI providers have gone into administration since mis-selling the product – giving people who were mis-sold the cover no choice but to try and reclaim their premiums through the FSCS.
Protecting your savings
The Financial Services Compensation Scheme is a ‘safety net’ for consumers, designed to protect your cash in case a company you have deposited money with goes bust.
However, the FSCS operates under complex rules and it will not cover you in every situation – so it’s important to know before you put money into any financial institution how your cash would be protected in the event that it collapsed.
Right now, UK-regulated savers are entitled to up to £85,000 worth of financial protection per individual, per financial institution – but not per banking ‘brand’, which can cause confusion in cases where there are links between seemingly unconnected banks. For a full guide to how your money would be protected in a crisis, read the Which? Are my savings safe? advice guide.
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