The FSCS revealed last week that its initial levy will stand at £160.7 million for 2005/06. It also unveiled an increase of 15 per cent in the bills for IFA firms over last year.
The IFA sector is being asked to contribute over £35 million towards compensation costs for consumers who have claims against firms which have gone out of business.
This is in addition to the sector’s FSA and FOS costs.
Mortgage intermediary firms have been sheltered from this burden for the current year due to their short track record with the FSCS and historic claims history.
However, AMI said the dangers can clearly be seen from experience in other parts of the market and warned the FSCS funding approach must be changed as it asks good firms to pick up the costs left by bad.
Ben Stafford, policy officer at AMI, said: “The burden on the IFA sector is growing by a massive amount and we don’t want this to happen in the mortgage sector where good firms will be penalised for bad firms going out of business.
“AMI is in ongoing talks with the FSA and FSCS to get this point across.”
One broker commented: “This levy of over £160 million makes it over £3 million per week, or £600,000 per working day, and for what?
“It is the smaller firms and companies that need to stand up and resist now before it is too late. Otherwise government and its henchmen at the FSA together with the big companies will happily see smaller units and individuals go to the wall.”
Heather Tilston, head of communications at the FSCS, said: “Under our scheme firms are allocated to certain contribution groups according to their regulated activities and the FSA fee blocks they are in.
“We don’t anticipate a lot of claims relating to mortgage firms so we are not anticipating huge levies for mortgage intermediaries. Any review of our funding approach would be made under the FSA.”
