Vida FatemiFCA has written a ‘Dear CEO’ letter to investment platforms and SIPP operators setting out its concerns on the way they deal with any interest earned on customers’ cash balances. After surveying 42 firms, FCA found that the majority of these firms retain some of the interest earned on these cash balances and many also charge a fee to customers for the cash they hold, known as “double dipping”. This may not reasonably reflect the costs to the firms of managing the cash and FCA is concerned that this may not be providing fair value to customers, may not be understood by consumers, or properly disclosed. FCA also notes with displeasure that this practice does not align with the cross cutting rules in the Consumer Duty, nor having proper regard to the outcomes the Duty requires.
Firms have been told to cease the practice of “double dipping”, review their approach to retention of interest and ensure that their approach takes account of FCA’s letter and represents fair value. Firms will need also to review and update their terms and conditions.
FCA wants firms to provide FCA with confirmation that they have ceased double dipping and of any other changes or improvements they have made, and also to provide a copy of the part of the firm’s terms and conditions that addresses the treatment of interest on customer cash balances. FCA requires the information it has requested by 31 January 2024 and firms will need to make any changes by 29 February 2024.