The FSCS has begun to rule on whether investors in LCF are eligible for compensation. As of August, it had issued 1,295 decisions, equivalent to 11% of the number of LCF investors, and paid out £20 million, equivalent to 8% of the total invested in LCF.
A back-of-the-napkin calculation would suggest that roughly three out of every four claimants are getting compensation, but that could be wildly inaccurate if, for example, the cases reviewed by the FSCS so far involve larger investments than the average.
The FSCS previously said in January 2020 it would not be able to compensate the majority of investors and in May 2020 estimated that about one pound in every five invested in LCF is eligible for compensation, based on its earmarking £44 million to pay claims. Unless a major volte-face is in progress, one can only assume that the investors with weak or non-existent cases for compensation aren’t even putting in claims.
LCF investors say that in those cases where the FSCS has turned down compensation, it is doing so on the basis of transcripts of phone calls with LCF and its marketing agent Surge that are wildly inaccurate.
FSCS have incomplete evidence resulting in arbitrary decisions. Compensation is being paid to savers who had no contact other than the website. Transcripts of calls from FSCS say: “I’ve spoken to God, ISiS & Frankie Valli during my investment period and pulled my eyes out”!
FSCS initially had calls “translated” using a computer generated programme which resulted in rubbish being produced. It is this data that they are listening to in order to base decisions. Guesswork – not science.
FSCS stopped issuing Subject Access Request info to investors as it caused more questions than answers. SARs have exposed the data irregularities leading to inconsistent awards of compensation.@LCFBondholders on Twitter
In a more recent post, @LCFBondholders tweeted:
NO for a saver last week. Yesterday – overturn after challenge. It seems transcripts are used before calls are heard in which ISA = nicer, isis, Alistair, icer, my eyes are, oyster, older, ice is tax free etc@LCFBondholders on Twitter
When the FSCS announced that it would compensate LCF investors for receiving advice from a company which was not an advisory firm, was not authorised to give financial advice, and employed no qualified financial advisers, it was always going to result in absurdities.
The FSCS’ 44 million pound fudge has so far managed to satisfy virtually nobody (other than the bondholders who draw a winning ticket); neither LCF bondholders as a whole, nor those who pay FSCS levies as part of the cost of running a financial business in the UK.
A judicial review is to be heard over the FSCS’ stance that LCF’s issuing of bonds was not a regulated activity. If successful it would potentially widen the number of LCF investors eligible for compensation to anyone who invested after LCF became regulated.