When high street bank Northern Rock faced a run in 2007, followed by the collapse of investment giant Lehman Brothers a year later, it signalled the start of a period of financial crisis from which we are yet to recover.
Many ordinary people were directly affected by the consequences as institutions they had saved money with, or invested in, went into administration.
The Financial Services Compensation Scheme (FSCS) is tasked with aiding consumers and paying compensation should their bank, investment or insurance provider or adviser go bust. And in the years since the credit crunch became recession, and recession turned into stifled recovery, the FSCS has been inundated with claims. But who is looking after the money – and ensuring consumers can recover their cash?
Suzette Browne has worked for the FSCS since its inception in 2001, and deals with enquiries daily. "It is very rewarding to be a part of the FSCS," she says. "I thoroughly enjoy the fact that I work for an organisation which helps so many people. We've handed over £24bn in compensation and protected 4 million people from losing money that they thought they'd never see again. That's an incredible feeling."
Browne works as a senior communications officer and says the job has changed substantially since she joined, not least because of the impact of the recession. "The FSCS is evolving all the time," she explains. "We get different types of claims every day and we have to constantly move forward to pay the different sorts of compensation claims that we have now, for savings, investments and insurance."
The most recent change is the FSCS's pledge to handle compensation claims as quickly as possible. As of January 2011, it aims to pay most deposit claims within seven days of a bank, building society or credit union being declared in default.
Browne says: "It's a much faster and more efficient pay-out system for deposits. For a seven-day payout, we don't ask you to fill in an application form. We get your data directly from the firm and, in most cases, you can expect to receive payment within seven days of that."
Since 2007, the FSCS has seen a steep rise in claims for compensation when financial organisations were hit by the uncertainty of the credit crunch. "The last two to three years have been very, very busy and we've had to deal with a lot of claims resulting from the banking defaults," she says. "If people are worried about their financial products, they can be assured that there is a compensation scheme that can help if things go wrong. If you don't understand whether you are covered by the scheme, you can always check the information on our website, or call up. We are here to reassure."
Browne advises anyone seeking to do business with a financial services firm to make the FSA's website their first point of call. She points out: "If a firm is authorised by the FSA, then you will be covered by the FSCS for compensation."
But what about when a firm isn't authorised by the FSA – has the FSCS had to reject claims for compensation? "Yes. It is very difficult to have to tell someone that we can't offer them compensation for claims from companies which aren't authorised," she says. "But in these scenarios, we have to say that we cannot help you. Our message is always to check that you are covered by the scheme before you start dealing with them."
Similarly, the FSCS cannot offer compensation for dealings or transactions made before a certain point in time (for instance, insurance brokers only became covered by the scheme in 2005, so any claims made for business carried out before that date would not be covered by the FSCS).
Last month, Browne took part in two FSCS Guardian webchats on this site (http://www.guardian.co.uk/fscs/fscs-webchat-insurance-money-investment-compensation). "It was very interesting to be able to interact with people directly," she says. "Their most common concerns were specific to their individual claims, or people were asking about how much compensation we pay [details of which are all outlined here.]
"It is horrible when someone thinks they may potentially lose their life savings, and very satisfying to be able to help and return that money to them through the FSCS. People need to be aware that there is a compensation scheme that they can turn to for help if things go wrong."
