Consumers who have been left tens of thousands of pounds out of pocket because of mistakes made by the City watchdog could soon see their compensation payments capped.
Under the Financial Conduct Authority’s proposals, cases where the customer has experienced distress and inconvenience will be limited to £1,000 payouts while those involving financial loss will be restricted to £10,000.
Campaigners have said this would mean the consumers who have suffered the most serious losses would be left significantly of pocket.
By law, the FCA is immune from claims for damages unless it is found to have acted in bad faith or breached human rights.
However, it does offer ex-gratia compensation when its own failures contribute to consumer losses.
The watchdog has proposed payments are capped in order to “simplify the wording” of its complaints scheme. A consultation on these proposals will run until September 14. If implemented, all new cases would be subject to the new limits but the rules would not affect existing complaints.
Mark Taber, a financial campaigner, said the regulator must not limit compensation in cases where it is clearly to blame for financial loss.
“The FCA already has statutory immunity from court claims for damages arising from its negligence,” he said.
“There has to be some mechanism to cover serious failure where an independent expert such as the Complaints Commissioner says the FCA should pay compensation commensurate with the losses caused.”
An independent investigation into the FCA’s oversight of the failed “mini-bond” provider London Capital & Finance, which collapsed leaving £237m of investors’ cash on the line, is currently underway.
Should a report conclude that the regulator were to blame any payouts would be severely limited under the new rules.
Telegraph Money is aware of cases where the regulator has offered compensation in excess of £10,000. Investor Gilbert West lost £44,275 to fraudsters in 2016 when he invested his pension in a company that claimed to be Horseshoe Credit Union.
The FCA’s register of financial firms had declared that the company was legitimate, even though it had been dissolved in 2012. Fraudsters were able to use the firm’s details to steal money, exploiting the incorrect information on the FCA’s database. He received a £22,138 compensation payment after taking his case to the Complaints Commissioner.
There have been several other cases where consumers followed information provided by the regulator which later turned out to be woefully inaccurate.
Mr Taber added: “There also needs to be recognition that where the FCA provides false information people may rely and act on it and incur substantial costs in the process.”
The FCA said: “We want to simplify the wording of the [complaints] scheme and make it more accessible to its main users – consumers and small businesses – as well as others.”