UK FCA Dear CEO Letter - Emoney Firms ensure customers understand how their money is protected

On Tuesday 18th May 2021, the UK Financial Conduct Authority issued a Dear CEO Letter to Electronic Money Institutions headed "Please act: ensure your customers understand how their money is protected."

You can read a copy of the letter here.

Some interesting excerpts from the letter below:

What is the UK FCA concerned about?:

• "We are concerned that many e-money firms compare their services to traditional bank accounts or hold themselves out as an alternative in their financial promotions, but do not adequately disclose the differences in protections between e-money accounts and bank accounts. In particular, they do not make it clear that Financial Services Compensation Scheme (FSCS) protection does not apply." 

 

• "We are still concerned that many e-money firms are not adequately disclosing the differences in protections between their services and traditional banking, in particular, that FSCS protection does not apply."

 

• "We are also concerned that firms are giving a potentially misleading impression to customers about the extent to which products or services are regulated by the FCA."

Action expected of emoney firms by the FCA:

1. "you write to your customers within six weeks of the date of this letter [Ed - i.e. 18 May 2021] to remind them of how their money is protected through safeguarding and that FSCS protection does not apply."
2. "draw this letter to the attention of your Board."
3. "expect the Board to have considered the issues we have raised here and to have approved the action taken in response." 

Note the FCA point that the communication to customer be separate from any other messaging or promotional activity. And that the FCA expects emoney firms to consider the appropriate method(s) of communication based on their business model and customer base, including any vulnerable customers. 

Why should emoney action the letter?:

Because the FCA intend to follow up, with a sample of firms, to assess the actions taken. 

Contact the team at CompliReg if you require assistance. 

You can read a copy of the letter here.