The FCA has abandoned plans to ban platform exit fees.

In a regulatory update today the watchdog said the move was no longer necessary as a number of platforms had dropped exit fees after the regulator highlighted the issue.

The FCA criticised exit fees as a barrier to investors moving platforms.

The FCA’s Investment Platforms Market study (2018/19) found that while the platform market “works well overall, there were areas where it could work better.”

One of the areas highlighted was the barrier to moving platforms created by exit fees levied by a number of platforms.

The FCA said in Policy Statement 19/29 it would consult on restricting platform exit fees in Q1 2020.

Due to the Coronavirus pandemic the FCA  then delayed the move to Spring 2021.

It now says: “We have now decided to stop work on this consultation.

“Since expressing our concerns in the 2018 Interim Report, there has been a marked shift in the market away from exit fees, with at least two major platforms announcing that they would no longer be charging exit fees.

“The FCA welcomes the direction of travel by the investment platforms sector in phasing out the use of exit fees.” 

The regulator added that while it has dropped the Exit Fees Consultation it will be closely monitoring the situation and has hinted it will shake up the sector if new barriers to moving platform or any other consumer detriment emerges.

The move to drop an exit fee ban has been criticised by some.

Richard Wilson, chief executive of interactive investor, said: “We are saddened to see this news snuck out on the afternoon of Friday 13th. Exit fees are a recipe for rip offs and a genuine barrier to consumers seeking better value for money - they should have been banned.

“The FCA rightly points out that the direction of travel in the industry has been away from exit fees, in large part because interactive investor and Hargreaves Lansdown have done away with them. But there are still platforms out there that have grown far too complacent, relying on customer inertia and hefty penalties."

“There is no reason to turn off the heat - quite the opposite. Scrutiny on exit fees needs to be extended to life companies, asset and wealth managers, life insurers and beyond. We are completely bewildered by the FCA’s announcement and today is a sad day for consumers.”