FCA writes to firms about the treatment of retained interest on customers’ cash balances

The FCA has investigated 42 firms on their practices in dealing with earned interest on customers‘ cash balances, as these have risen in the last 18-24 months with the rise of the interest rates. Most of these investment platforms and SIPP operators retain part of the earned interest and additionally charge a fee for the cash, which is a practice called „double dipping“. Customers are vaguely informed about this. FCA believes that this is not fair to the client and urges firms to cease these practices, as the methodology is not in-line with the Consumer Duty.
In the open letter from 12 December 2023, Sheldon Mills, the Executive Director of Consumers and Competition at the FCA, stresses the following expectations:
– firms should immediately stop double dipping and review their practices,
– retention of interest should represent fair value for the customers,
– customers must have easy access to the description of practices, which are expected to be conveyed in a clear way, not resulting in ambiguity,
– firms should tailor investment products offered to retail customers and inform them about the consequences of holding large amounts of cash on such platforms.
Mills expects the firms to implement the above-mentioned points and provide the FCA with confirmation of having done so.