London Capital Group Ltd · DRN-4999657

The complaint Mr C has complained that London Capital Group Ltd (‘LCG’) has charged him an inactivity fee on his spread betting account. What happened I have previously issued a provisional decision regarding this complaint. The following represents excerpts from my provisional decision, outlining the background to this complaint and my provisional findings, and forms part of this final decision: “Mr C opened a spread betting account in 2011. He has explained that when he started the account, he understood that it was with another business other than LCG. I will return to this issue later. The last time Mr C deposited money on his account was in October 2015, and the last time he traded was on 2 November 2015. On 22 August 2016 the funds on the account totalling £2,199.62 were moved over to a new account that was held directly on the LCG trading platform. During 2016 LCG started to charge Mr C a £15 per month inactivity fee, taken from the account balance. We have been sent differing evidence about when the fee was first charged, and I will also be returning to this issue. During 2019 LCG altered the status of Mr C’s account to ‘suspended’. Mr C says that he was not aware of this until 2022. In August 2022 Mr C attempted to log into the account in order to withdraw his funds and close it. However he found that he was unable to access it. Access was reinstated in September 2022, but Mr C says this was then removed again within 24 hours, at which point LCG told him that it was closing his account. Mr C asked that his remaining funds be returned to him and this occurred on 21 September 2022. However Mr C says that he had to send multiple emails to obtain the refund. On 14 October 2022 Mr C complained to LCG that he had been charged the inactivity fee since 2016 whilst not having access to the account. He said that the lack of access meant that he was unable to take any action to prevent the fee being chargeable. Mr C also questioned the justification for LCG charging this fee. He asked that it refund him the fees he’d been charged whilst he had no access to the account. In response LCG stated that Mr C had been transferred in August 2016 to its LCG trading platform from an account that was branded under a different business name. It said that clause 20 of the terms and conditions of the account allowed for it to charge an inactivity fee 180 days after the last activity. LCG said it had applied the monthly fee from June 2016 until July 2022. It calculated the total fees to be £1,095. It said that when it paid Mr C the proceeds of his account in September 2022, this should have been for £1,104.62 (the 2016 transferred balance of £2,199.62 minus total fees of £1,095). However, in error it had refunded Mr C £1,164.92, which was £60 more than was due.

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LCG commented that it had contacted Mr C in May 2022 to remind him about his inactive account and discuss his future trading plans. It said that it had acted fairly by applying inactivity fees. Unhappy with LCG’s response, Mr C brought a complaint to this service. He said that he had opened his account in 2011 with a member of the LCG group, and confirmed that in 2016 he had been given a new account number and moved to the new trading platform when brands were consolidated. Mr C stated that the inactivity fee had been charged from December 2016, and he commented that his understanding was that he’d not been able to access the account from that date. Mr C questioned whether the account balance figure LCG had quoted of £2,199.62 in August 2016 was accurate because the statements he received for August and September 2016 showed a balance of £1,944.62. He was also unclear about when the account terms were introduced which included clause 20, quoted by LCG, covering the application of inactivity fees. Mr C complained that he was given less than 24 hours online access to his account on 12/13 September 2022 in order to view its records. He again asked how LCG could justify charging £15 per month when he’d not had access to his account. Mr C told our investigator that from late 2014 until 2022 he’d been working overseas and had found that he couldn’t access LCG’s platform due to a firewall. The investigator contacted LCG and commented that Mr C had raised his complaint with it in October 2022, more than six years since his account moved over to its platform in August 2016 and he’d started to incur inactivity fees. Referencing the Dispute Resolution (DISP) rules which determine the powers of this service to consider complaints, and in particular the rules which relate to time limits, the investigator asked if LCG consented to us looking into this case even if it had been brought too late. When responding LCG did not explicitly confirm its position on consent. Our investigator did not uphold Mr C’s complaint. His view was that the inactivity fee had been charged in accordance with the account terms. The investigator described Mr C’s complaint as being that he wasn’t aware his account had been suspended, and that if he had been, Mr C would have taken steps to remove the suspension and prevent the fees. But the investigator did not think Mr C would have acted differently if he had become aware earlier that his account had been suspended. He said this because his view was that Mr C had no intention of trading again on the account, meaning he was still going to incur the inactivity fees. The investigator noted that although Mr C had said he couldn’t access LCG’s platform from 2014 whilst overseas, he had deposited money and traded in late 2015. He also quoted from an email that Mr C had sent in 2015 where he’d said he’d changed his address and wanted to deposit some money into the account but couldn’t find the option to do this on LCG’s website. On balance the investigator concluded that Mr C was able to access LCG’s website. He said LCG’s suspension of the account was a security measure because it had not been used for several years. He’d not seen evidence that Mr C contacted LCG before August 2022 to access his account. Mr C did not agree with the investigator’s findings. He said he had never attempted to open an account with LCG. Mr C explained that in 2011 he was looking to open a spread betting account, and because he already had a trading account with a provider, he chose it for his spread betting account too. This account was labelled as being from TD Financial Spread Trading/TD Waterhouse Spread Trading. Mr C said that he did not know that LCG was

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providing the trading platform, and he considered that he was a customer of TD Waterhouse, not LCG. When he made his last deposit and trade in 2015, Mr C said he did so as a TD Waterhouse customer. He commented that the TD Waterhouse website did not have the same firewall issues as LCG’s, and this was why he was able to carry out the 2015 activity. He also said that his 2015 email sent to change his address would have been to TD Waterhouse because he did not know LCG at this time. Mr C forwarded an extract from the email he received in August 2016 when his account was transferred onto the LCG trading platform. He highlighted that this was signed off by TD Financial Spread Trading and referred to “the launch of TD Trader”. He said he couldn’t tell if his account had been moved at this time to the LCG platform. In terms of monthly statements, Mr C said that he only noticed in 2022 that these had been sent by LCG. He explained that either he or his email provider had been sending them to a trash folder, but he’d managed to recover them, and this is why he’d seen he’d been charged a monthly inactivity fee. Mr C said that from 2016 he’d only been sent these statements plus an email in 2017 about MiFID related changes from TD Spread Trading. When he received the email from LCG in May 2022 asking about his future trading plans Mr C deleted it because he did not recognise the business as one he had a connection to. Mr C questioned the justification for LCG charging £15 a month for inactivity when compared against the costs it incurs operating the account. He said that rather than trading to avoid this fee, it made sense instead for him to close the account. However Mr C said that it wasn’t straightforward to close the account in 2022 when he tried to. He encountered difficulties accessing the account when LCG said it had been reactivated, could not update the details he needed to change, and had access removed again on 13 September 2022. Eventually Mr C said he could only close the account with the help of LCG staff. He commented that LCG had taken too long to arrange account access for him. Mr C said that he’d had two other spread betting accounts with different providers which he’d also not used from 2015. They hadn’t charged inactivity fees and he’d been able to close those accounts in 2022 promptly. Referring to account terms quoted by the investigator that covered the charging of an inactivity fee, Mr C questioned when these were introduced. He disputed that he was a customer of LCG in 2015. He also stated that only the account terms from 2021 referred to the fee as being £15 a month, and he said that he had no record of receiving terms from LCG. Mr C said that when investigating his complaint LCG had told him his account was ‘frozen’ in 2016, but he was now being told this was 2019. The investigator forwarded to Mr C LCG’s account terms dated October 2015 and December 2021. He commented that LCG had been sending statements to Mr C showing the inactivity fee since 2016, but Mr C had only contacted LCG about this in August 2022. The investigator said that even if Mr C had been told at an earlier date that his account was frozen, it is unlikely that this would have changed the actions he took regarding his account. In response Mr C reiterated that in 2015 he was a TD Waterhouse customer, and he therefore disputed that LCG’s terms from 2015 were applicable to him. The complaint was referred for review by an ombudsman. I asked Mr C to clarify when he understood that his spread betting account was having a £15 charge deducted from it. He responded that he’d had three trading accounts, covering traditional shares, an ISA, and spread betting. He knew his share trading account was subject to a £15 fee, but he hadn’t realised the spread betting account had a fee until 2022.

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I asked LCG for clarification around its account terms, and when Mr C became its customer. It responded that Mr C had opened his account in 2011 with LCG, with TD Financial Spread Trading/TD Waterhouse Spread Trading acting as a ‘white label’. It said that Mr C had never held a TD Waterhouse account for his spread betting. It provided its 2011 account terms. LCG stated that when its clients including Mr C were moved to LCG’s new platform, it provided them with new account terms in August 2016, prior to the migration. It forwarded a copy of these terms dated June 2016. LCG said that clients were given a link to the 2016 terms as part of the migration, and the migration would not have occurred without the new account terms being accepted. In terms of the justification for charging a £15 inactivity fee, LCG stated this was common in the spread betting industry, covering the costs of maintaining inactive accounts. It gave some examples of the actions it takes for inactive accounts, such as storing personal data, holding client money and sending emails. I asked LCG to confirm whether it consented to us looking into this case if it had been brought too late. It responded that it does not. What I’ve provisionally decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Our powers to consider this complaint Initially I need to consider the extent of this service’s powers to consider this complaint. The DISP rules mentioned above are in the Financial Conduct Authority’s (FCA) handbook, which can be found online. DISP 2.8.2R states that – where a business doesn’t agree – I can’t look into a complaint if it was made more than six years after the event complained of, or if later, more than three years from the date on which the complainant became aware (or ought reasonably to have become aware) that they had cause for complaint. An exception to this is where I conclude that the failure to comply with the time limits is the result of exceptional circumstances. LCG does not consent to us looking at this complaint if it has been brought too late. Mr C complained to LCG about the charging of inactivity fees on 14 October 2022. I consider the complaint is in essence a series of complaints about a series of monthly events, these being the charging of each monthly fee, albeit we look at the subject matter under one complaint. LCG told Mr C in its response to his complaint that it had applied an inactivity fee from June 2016. However, it has also forwarded a statement for the account from the date that it was moved to the LCG platform on 22 August 2016. This shows the first fee as being charged on 30 September 2016, with subsequent fees for the most part being applied at the end of the month. The fact that no charge is shown for 30 August 2016 leads me to the conclusion that it is more likely than not that the fee only started to be charged from 30 September 2016. When the fee was first charged is relevant when considering our powers to investigate this complaint, taking into account the time limits detailed above. My view is that, with each fee charged being a monthly event, under this complaint I can consider all the fees charged within six years of Mr C raising his complaint on 14 October 2022. That means I can consider all the fees charged since 30 October 2016.

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My current view is that there was only one charged before then, on 30 September 2016. For me to be able to consider that September 2016 fee, I need to assess the second limb of the time limit. That says that I can consider a complaint issue raised outside the six year period if it’s been made within three years from the date on which the complainant became aware (or ought reasonably to have become aware) that they had cause for complaint. My understanding is that monthly account statements were sent to Mr C from when he moved onto LCG’s platform in August 2016. He has said that either he or his email provider sent these to a trash folder, and I understand this was because he did not believe he was a customer of LCG, but instead thought he had an account with TD Waterhouse. I have thought carefully about Mr C’s comments. Overall my view is that, because monthly statements were being sent to him showing the inactivity fee being charged, he should reasonably have known about the September 2016 fee in late 2016. This means that in respect of the September 2016 fee only, Mr C complained too late, because his complaint was more than six years after it had been charged, and more than three years after he should reasonably have known about this particular monthly fee. My current view is therefore that I can consider all the fees charged from 30 October 2016 because Mr C complained about them within six years of them being applied. But I cannot consider the September 2016 fee because this has been complained about too late. I should add that if I am wrong regarding when the first fee was applied, and there were in fact fees charged before September 2016, I currently consider that I wouldn’t be able to investigate those earlier fees either. That is for the same reasons that I cannot look at the September 2016 fee. My current view of the element of the complaint that I can consider relating to the inactivity fees charged from 30 October 2016 Firstly I think it would be helpful to address what Mr C has said about his understanding of which firm he was a customer of for his account. He has said that when he opened it in 2011, it was labelled as being from TD Financial Spread Trading/TD Waterhouse Spread Trading. Mr C has said he was not a customer of LCG, but LCG says he was from 2011. The FCA Register confirms that both TD Financial Spread Trading and TD Waterhouse Spread Trading were trading names of LCG. Consequently, my view is that individuals using services offered by TD Financial Spread Trading and TD Waterhouse Spread Trading were in fact customers of LCG. I also note that when he first brought his complaint to us, Mr C said that the account he opened in 2011 was “with a member of the LCG group”. He also acknowledged that moving his account in 2016 represented LCG rationalising its platforms. Based on the evidence provided I am satisfied that Mr C was a customer of LCG from 2011. In terms of LCG’s charging of an inactivity fee, it has provided its account terms dated April 2010 which it says applied to Mr C’s account when it opened. LCG acknowledges that these terms did not include provision for charging an inactivity fee, but it has commented that they did include a clause relating to customers’ responsibility to stay up to date with transactions on the account. Although I note LCG’s comments, my view is that such a clause would not be sufficient to bring to a consumer’s attention the introduction of an inactivity fee. October 2015 terms supplied by LCG include a fees and payments section that says an account will be debited with “fees (such as inactivity fees) as detailed on our website from time to time.” No more detail is given about inactivity fees. LCG says that when its customers were migrated to its new platform in August 2016, they were provided with new account terms. It has supplied those terms, dated June 2016. As

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part of the migration, LCG says it provided customers with a link to a new account opening application where they had to provide details such as employment and income. It says an account would not have been migrated without acceptance of the new account terms. Mr C has provided an email he received on 22 August 2016 from TD Financial Spread Trading. This explained that his account had been migrated to a new platform, and it required him to click on a link to activate it. As LCG’s records show that the account was successfully migrated, it seems clear that Mr C must have clicked on the activation link. I consider it more likely than not that the June 2016 account terms would have been available for Mr C to read when activating the account. But taking into account processes that are widely used when consumers make online applications to open accounts, I also consider it likely that Mr C was asked to tick a box that acknowledged he'd been provided with the new terms. In my view, he would not necessarily have read the new account terms in full. Section 8 in the June 2016 terms was entitled ‘Inactivity Fees’. It explained that where no activity had taken place for 180 calendar days or more, the account would be deemed inactive and a monthly fee of £15 would be charged. The fee would be deducted from the available cash balance. It was also confirmed: “We will never take your account to a negative balance to cover the fee.” From 2016 to 2022, LCG deducted £15 a month from Mr C’s account balance. It says that in total it deducted £1,095 in activity fees. When I asked LCG for its reasons for applying this fee to inactive or suspended accounts, it said that there were costs applicable to maintaining such accounts. It mentioned the need to store data, hold client money, keep ‘know your customer’ information up to date, and make calls or send reminder emails to inactive users. I note what LCG has said in this regard. However, its terms only deduct the inactivity fee when there is an available balance. In my view that does not seem entirely consistent with the notion that inactive accounts cause LCG significant expense, as an inactive account with a balance of zero or less would not incur the monthly fee. In Mr C’s case, approximately half of his balance was deducted in fees over a six year period. Had the account remained inactive for a further six years, and LCG had continued to apply its fee, it’s not clear to me what would have happened to the account once the balance had reached zero. Further to this, whilst LCG has said that it makes calls and/or sends reminders to inactive users about their accounts, in Mr C’s case, there seems to have been very little contact from LCG about his account. LCG has provided records showing that it attempted to call Mr C on the number it holds for him in September 2018 and July 2020 but was unsuccessful. It has also provided an email it sent in May 2022 asking Mr C for his trading plans for the remainder of the year. That mentioned that fees are charged after six months of inactivity, and it suggested that Mr C should “log in and place one trade or withdraw your funds to avoid being charged.” But by this time, Mr C had already been charged inactivity fees for almost six years. My view on balance is that LCG took very limited action to make Mr C aware that his balance was being reduced each month because he had simply left the account unused. I acknowledge LCG’s comment that inactivity fees are common in the spread betting industry, and I do not consider that in general it is unfair to charge such a fee. However I do have concerns about how the fee was introduced in the case of Mr C’s account, and the circumstances under which it was charged for around six years. LCG has a regulatory obligation to treat its customers fairly. I am obliged to consider this complaint on a fair and reasonable basis, taking into account the individual circumstances. As I explained above, when Mr C clicked on the activation link sent to him in August 2016, I consider it likely that the June 2016 account terms would have been available for him to

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read. But it seems unlikely to me that he did read them, or in particular notice the introduction of the £15 monthly inactivity fee. From September 2016, Mr C was paying £15 each month for a spread betting account that he was not using. When Mr C opened his account in 2011, there was no inactivity fee applicable. It seems to me reasonable to say that at this time, he did not make an informed decision to open an account with such a fee. Mr C stopped using his LCG account in 2015. He was sent monthly statements but he did not pay attention to the information in them (this may be because he did not recognise LCG as a business that he had an account with, or because these went into a trash folder). After the last transaction that Mr C carried out in late 2015, it would seem that he stopped paying any attention to the account. Mr C was taking the risk that LCG would change the account terms without him noticing, and in my view this is what happened in respect of the introduction of the inactivity fee. But Mr C’s lack of attention to his account does not give LCG the freedom to do whatever it likes, because it still has to treat him fairly. And it is difficult to see what utility or value a consumer gains from paying £15 a month for an account they are not using. My view is that LCG should have thought about what was happening in the circumstances of this case. On balance it does not make economic sense to pay £180 a year to hold a spread betting account that you’re not using. The fact that Mr C did this suggests that LCG had failed to successfully get the message to him about inactivity fees. LCG will know that sending statements by email is not a fool proof way of highlighting information. People receive a lot of emails and may not pay close attention to those which relate to a service they no longer actively use. Whilst a consumer might decide it’s worth keeping an unused account open for a relatively short period of time and incur a fee for that, it doesn’t make sense to do that for long. And this also doesn’t seem to be in a client’s best interest. In my view, the likely reason why Mr C kept his account open whilst being charged inactivity fees is because he had not realised he was being charged such fees. On balance I consider that LCG should reasonably have also come to that conclusion. In these circumstances, taking into account regulatory obligations to treat customers fairly, communicate clearly and act in the client’s best interest, my view is that LCG should have done more to ensure Mr C understood his balance was being reduced each month by £15. It seems likely to me that Mr C was paying this fee in ignorance, rather than as a result of making an informed choice. I am not saying that LCG should not have introduced the fee. But I do not consider it was fair to collect the fee without being more confident that Mr C did agree to it, bearing in mind that this would not appear to be in the client’s best interests, taking into account the real world economics of the situation. I consider LCG should have done more to make sure Mr C really did want to continue to hold the account he was not using for a cost of £15 a month. For example, LCG could have contacted him by post. I note that in 2015 Mr C had provided LCG with his updated address. Had LCG sent a letter to him about this, I consider it’s reasonable to conclude that he would have closed his account without incurring further fees. Once he’d moved to the new platform in August 2016, my view is that LCG should have contacted Mr C by some other means than email within two months of his new account being set up – so towards the end of October 2016. On the basis that he would then have chosen to close his account, I currently consider that LCG should be required to refund to Mr C the inactivity fees he incurred from November 2016, together with interest.

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I note that LCG says when it refunded Mr C the remaining balance on his account, in error it paid him £60 more than it should have done. This is the equivalent of four monthly inactivity fees. When refunding the fees charged from November 2016, I would expect LCG to confirm how it has calculated this figure, if it concludes that the £60 amount essentially represents a refund of four inactivity fees that it has already made. As I explained above, I’m not saying that the introduction of an inactivity fee was itself unfair. I also consider that Mr C could have taken more steps by paying greater attention to the information LCG was emailing him. But if LCG had contacted him not long after it started to apply the fee to make sure he understood it was being charged and consented to it, I consider Mr C would have either closed his account or managed it to avoid inactivity fees. My view is that it was not fair and reasonable of LCG to fail to take such steps.” Responses to my provisional decision Mr C accepted my provisional findings. He clarified that until he did some research in 2022, he hadn’t realised that when he took out his account in 2011 it was with a member of the LCG group. He also confirmed that he was surprised he’d been an LCG customer from 2011, and he provided some further press articles regarding the relationship between LCG and TD Waterhouse. LCG did not agree with my provisional decision. It highlighted that the FCA’s Client Assets Sourcebook (CASS) places obligations upon it to protect money held on behalf of retail clients, and it said this creates an operational expense. To disincentivise client money being held in dormant accounts where no business is being conducted, LCG said that, along with other businesses in the industry, it applies inactivity fees. LCG commented that if a client’s balance falls to zero, further inactivity fees wouldn’t be permitted, and would not be necessary either. LCG stated that it does not seem to be in dispute that inactivity fees are standard in the industry, and a legitimate way for spread betting and CFD businesses to disincentivise clients from holding cash on dormant trading accounts. It also said that it’s not disputed that Mr C accepted new account terms which included a provision for inactivity fees when he migrated to LCG’s new trading platform in 2016, and that he was sent a statement each month by email that confirmed the application of this fee. LCG suggested that my provisional findings effectively voided its account terms, absolving Mr C of any responsibility for the terms he accepted, or for his failure to read the monthly statements. LCG commented that it considers my provisional findings are unfair. However it said that to resolve matters amicably, it was willing to refund inactivity fees to Mr C, but that it does not accept it has been at fault, and it strongly believes its actions have been carried out correctly. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. I note LCG’s comments about its obligations under CASS. It has said that this creates an operational expense, and it has confirmed that once a client account falls to zero, no inactivity fees are charged. However, in earlier submissions LCG commented that the inactivity fee also covered actions such as storing personal data, keeping ‘know your customer’ information up to date, making calls or sending emails to inactive users. As these would still appear to be activities applicable to an account with a zero balance, my view remains that there remains an element of uncertainty about what costs are incurred by a

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business when holding inactive accounts. That said, as LCG has commented and I acknowledged in my provisional decision, I accept that inactivity fees are commonplace in the spread betting and CFD industry. I also previously confirmed that I do not consider in general it is unfair to charge such a fee. But I would not agree that the findings in my provisional decision effectively void LCG’s account terms. My findings in this case are based on the specific circumstances which applied to Mr C when he incurred the inactivity fees. I remain of the opinion that when clicking on the activation link for his account when it moved to the new LCG trading platform in August 2016, it is unlikely that Mr C read the new account terms, or in particular noticed the introduction of the £15 per month inactivity fee. I accept that Mr C did not pay attention to the monthly statements he was emailed that showed the fee being charged, but this may be because he did not recognise LCG as a business he was a customer of, or the emails may have gone to his trash folder. As I said in my provisional decision, I am not saying that LCG should not have introduced the inactivity fee. But the result of the change in account terms meant that Mr C paid £180 a year for an account he was not using. It seems likely to me that Mr C did not realise he was being charged this fee. LCG had a regulatory obligation to treat customers fairly and act in the client’s best interest. My view remains that, looking at the circumstances that occurred in this case, LCG should have done more to ensure that Mr C understood his balance was reducing each month by £15. Had it done so, I consider it is more likely than not that Mr C would have closed his account. LCG has said that to resolve matters amicably, it’s willing to refund inactivity fees to Mr C. I acknowledge that it does not accept it has been at fault, and it considers its actions with Mr C’s account have been appropriate. For the reasons I explained in my provisional decision, my view remains that LCG should refund the inactivity fees it charged Mr C from November 2016, together with interest. My final decision My final decision is that I uphold this complaint and require London Capital Group Ltd to pay Mr C the following redress:- • Repay the monthly inactivity fees charged on the account from November 2016 until he closed the account. • To each of these monthly fees London Capital Group Ltd must add simple interest at 8% per annum (*) from the date each fee was paid to the date of settlement. * If London Capital Group Ltd considers that it’s required by HM Revenue & Customs to deduct income tax from that interest, it should tell Mr C how much it’s taken off. It should also give Mr C a tax deduction certificate if asked for one, so he can reclaim the tax from HM Revenue & Customs if appropriate. In light of its comments that it has already refunded Mr C £60 more than it should have done when sending him his closing account balance, London Capital Group Ltd should confirm to Mr C how it has calculated the above repayment of the inactivity fees. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr C to accept or reject my decision before 18 October 2024. John Swain

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Ombudsman

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