Collective redress schemes to be limited by 15-year long-stop

The Financial Services Authority’s power to set up collective redress schemes for consumers will be limited by a 15-year long-stop.

The FSA was given the ability to compel firms to compensate clients through a collective scheme by the Financial Services Act 2010. The Limitation Act 1980 will apply to this schemes, meaning that consumers will have 15 years in which to make a claim, according to an FSA guidance note.

‘A consumer redress scheme cannot extend normal limitation periods,’ the note states.

The last government gave the FSA power to establish collective redress scheme in response to concerns about the Financial Ombudsman Service being overwhelmed by complaints about issues like Payment Protection Insurance.

Complaints made to a redress scheme would be reviewed based on legal principles rather than those used by the FSA or the Financial Ombudsman Services, the note stated.

'So in other words, the [collective redress] power is limited so that the only failures a scheme can address are those that a court or tribunal would find to have been failures at the time the activities were carried on (rather than a subjective assessment by the FSA of the reasonableness of a firm’s actions),’ it said.