18 May 2007
A city law firm has claimed that the Financial Services Authority's (FSA's) recent determination to encourage companies to pay out compensation voluntarily could impact negatively on consumers' pockets.
Under the EU's proposed Markets Financial Instruments Directive, which goes live in November, companies will have an obligation to pay customers compensation if they realise there is a fault with the service or that the customer has been charged unfairly.
With the FSA's recent pet cause being the clampdown on unfair Payment Protection Insurance (PPI) policies, Jonathan Davies, Partner at Reynolds Porter Chamberlain, has warned that by following EU directives to enforce voluntary compensation from financial service providers, consumers may end up footing the bill.
"The new dispute resolution rules could see many companies being required to offer compensation on a proactive basis once they become aware of a recurring problem. At the moment they can wait until a customer complains," he told Post magazine.
"This will be a costly exercise that will inevitably hit the pockets of customers by pushing up the price of financial products," Mr Davies explained, adding that if there was a future mis-selling scandal with PPIs in the future, the FSA's expectation for lenders to provide compensation automatically would force them to claw back money elsewhere.
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