E-money Institutions To Remind Customers About Safeguarding vs The Financial Services Compensation Scheme

The UK Financial Conduct Authority is still concerned that customers of electronic money institutions (EMIs) do not understand that any funds they hold in their e-money accounts are safeguarded, but not covered by the "Financial Services Compensation Scheme" (basically, the UK depositor protection scheme for banks, building societies and credit unions). Of course, if the bank where the EMI holds its safeguarding account were to fold then the bank account would be covered by the FSCS but that is a different matter. 

The FCA has written to EMIs asking them to write to their customers before 29 June 2021 to "remind them of how their money is protected through safeguarding and that FSCS protection does not apply." Firms may include a link to the FCA's explanation to help customers decide whether that level of protection is appropriate for their circumstances (e.g. EMIs cannot pay interest, so any balance you aren't likely to use in the near future may as well be moved to a bank savings account that does). The communication must be separate from any other messaging or promotional activity, and the method(s) of communication may vary based on the EMI's business model and customer base, including any vulnerable customers. 

EMIs must also review their financial promotions in this regard to ensure customers get enough information on the topic. Where the FCA is named in promotions that refer to matters the FCA does not regulate, it must be made clear that those matters are not regulated by the FCA (a wider issue for the FCA).

The FCA wants its letter brought to the attention of the EMI's board of directors, which is expected to have considered the issues and to have approved the action taken in response. 

The FCA has promised to assess the action taken by a sample of EMIs.

Please let me know if I can help.