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<p>The Financial Services Compensation Scheme (FSCS) is the compensation scheme of
last resort for customers of failed UK-authorised financial services firms and is
funded by a levy on the financial services industry. The FSCS is an independent non-governmental
body and carries out its compensation function within rules set by the Prudential
Regulation Authority and the Financial Conduct Authority (FCA), they have the power
to decide which activities are given FSCS protection. In 2016, the FCA decided not
to extend FSCS protection to most consumer credit activities because it believed other
regulatory requirements were sufficient.</p><p> </p><p>The FCA’s reasoning for not
extending FSCS protection was set out in a letter on 15 February 2019 from its Chief
Executive to the Chair of the Treasury Select Committee. This reasoning was that consumer
credit firms did not generally hold client assets; losses to consumers had reduced
since the FCA had taken over regulation of consumer credit; and, because the cost
of providing FSCS cover for high-cost short-term credit would likely need to be subsidised
by levies on other regulated firms. A copy of that letter can be found here: <a href="https://www.parliament.uk/globalassets/documents/commons-committees/treasury/correspondence/2017-19/fca-chief-executive-to-chair-re-wonga-150219.pdf"
target="_blank">https://www.parliament.uk/globalassets/documents/commons-committees/treasury/correspondence/2017-19/fca-chief-executive-to-chair-re-wonga-150219.pdf</a>.</p><p>
</p><p>Treasury ministers and officials meet regularly with the FCA, and the Government
will continue to work closely with the FCA to ensure consumers of financial services
are treated fairly.</p>
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