The right to be clear over forex rights

The collapse of Crown Currency Exchange has thrown a spotlight on protection for consumers using currency exchange companies. Company collapses are no laughing matter as the 13,000 clients of Crown Currency Exchange can sadly testify. This was the latest financial services company to go to the wall taking with it an estimated £20 million. And the worst news of all, is those 13,000 savers stand little chance of seeing any of their money back. Why? Because foreign exchange companies are not covered by any compensation scheme.

This neglected area of regulatory protection lead ExpatMoneyChannel to conduct a survey of foreign exchange companies to find out more about how these companies are actually regulated and supervised. The results unearthed details and facts that few consumers are aware of.

The main points of the survey found that:
1) There's a significant difference between those currency exchange firms that are FSA registered and those that are FSA authorised which is confusing for consumers.
2) The latest regulations which came into force in November 2009 have not changed the fact that customers of payment service firms do not have access to the Financial Services Compensation Scheme.
3) The fact that only those currency exchange providers offering payment services have to be regulated is a further cause of consumer confusion. Bureaux de change and firms offering travel money services only are exempt from FSA regulation. Such companies need only register with HM Revenue & Customs. Many consumers do not understand the difference.
4) Pre-paid currency cards issued by major banks and building societies in conjunction with currency exchange firms are considered e-money products and are excluded from the Financial Services Compensation Scheme.

The non-standardisation of the rules and regulations is confusing for consumers but one fact that stands out clearly is consumers are being poorly served with the lack of uniformity and information about FSA regulation of this sector. Many consumers would see a FSA logo on a company's website and make the assumption that not only was their money completely protected from loss or theft, but that such funds would be covered by a compensation pay-out were that company to go to the wall.

So how should a consumer set about choosing a foreign exchange service? Click here to read our guide which will help you find out the extent of a company's regulatory obligations. You have a right to be clear over the layers of consumer protection, or lack of them, when placing your money with a foreign exchange services company.