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Apfa slams steep rise in FSCS legal costs

Chris Hannant 480

The Association of Professional Financial Advisers has criticised the Financial Services Compensation Scheme over its rising budget for pursuing recoveries, saying costly legal action may not be effective.

The FSCS published its Outlook newsletter last week, in which it forecast the cost of pursuing recoveries will reach £7.7m in 2012/13. It had originally estimated costs of £3.9m in its budget, published in February.

Apfa claims most of the £7.7m will be spent on legal fees and questions whether legal action is cost effective.

In a statement issued by the trade body today, Apfa policy director Chris Hannant says it is not cost effective for the FSCS to use city lawyers to pursue small claims.

Hannant says: “These are significant numbers for the profession, but the worst of it is that we have no idea of how cost effective legal action has been. The FSCS’s half year review gives no detail at all as to what money has been recovered from legal actions so far. The FSA must look closely at this issue. The FSCS needs to demonstrate that these recoveries are warranted and cost effective.

“Furthermore, there should now be a process for bringing an end to actions against advisers with a handful of cases. It cannot be cost effective to use City lawyers to pursue claims worth small amounts.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. It would be interesting to compare figures on firms accounts for payment in settlement to the FSCS against both the original claim by the FSCS and the average legal costs as I suspect the cost for many of the ill thought out pursuit of small firms has exceeded recoveries by a massive amount.

  2. Well done APFA. A well aimed arrow. I do hope this gets some traction and that some kind of positive outcome will result.

  3. Why are we being shot by all sides ? now the lawyers are in on the turkey shoot.

    All an IFA can do is work their way into the heart of the crowd

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