FCA drops plan to ban ‘rip-off’ platform exit fees

The City watchdog is dropping its consultation on plans to ban investment platform exit fees following a ‘marked shift’ away from them over the last year.

The Financial Conduct Authority (FCA) had been due to publish its consultation on the move before the end of 2019, but publication was twice delayed, to the first quarter of this year, then next spring, due to the coronavirus pandemic.

But the regulator has now announced the consultation has been abandoned, saying there had been a ‘marked shift’ away from exit fees in the market since it first expressed concerns, with ‘at least two major platforms announcing they would no longer be charging exit fees’.

Interactive Investor announced it would stop charging exit fees in November 2018, while Hargreaves Lansdown followed suit in September last year.

‘The FCA welcomes the direction of travel by the investment platforms sector in phasing out the use of exit fees,’ the FCA said.

‘We have therefore decided to stop the exit fees work but will be closely monitoring the situation, with the potential to consult on new rules if market changes lead to harm re-emerging in this area.’

Interactive Investor chief executive Richard Wilson said he was ‘saddened’ by the news.

‘Exit fees are a recipe for rip-offs and a genuine barrier to consumers seeking better value for money – they should have been banned,’ he said.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said the abandonment of the FCA’s work was  ‘missed opportunity’.

‘This was a chance to ensure that no-one has to pay a penalty or fee for trying to do better with their money,’ she said.

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