The Financial Conduct Authority (FCA) and Financial Ombudsman
Service are seeking to modernise the financial redress system to
help prevent it becoming overwhelmed, delaying consumer
compensation.
Currently, the majority of complaints are resolved by firms, and
the redress system works well for individual cases that come to
the Financial Ombudsman. But high volumes of complaints on
specific or novel issues can jam the system and cause significant
delays.
The changes will help firms identify and resolve issues before
complaints escalate and aim to give greater predictability, so
businesses have confidence to invest, innovate and support UK
growth. The proposals include:
- Improving how the FCA and Financial Ombudsman work together
to ensure consistency in the interpretation of regulations. This
includes a new referral process to improve transparency about
regulatory alignment and a lead complaint process to look at
novel and significant complaint issues as they emerge.
- Clearer guidance for firms on reporting issues to the FCA
sooner, alongside good practice examples to help identify and
resolve complaints.
- Guidelines to help industry assess and trigger the need to
resolve a situation with wider implications that could spike
complaints.
- Changes to the way the Financial Ombudsman processes
complaints to ensure they are well-evidenced and ready before an
investigation begins.
Sarah Pritchard, Deputy Chief Executive at the FCA,
said:
“When something goes wrong, it is right that people are
compensated. But a lack of certainty in the financial redress
system can hold back investment and innovation. Our changes will
help create a system that is more predictable for firms and gives
consumers quick and fair compensation where they're owed it,
supporting UK growth.”
James Dipple-Johnstone, Interim Chief Ombudsman at the
Financial Ombudsman Service, said:
“These reforms mark a significant step in modernising the UK's
redress system, making it more agile and responsive and a much
better fit for today's economy. Our changes will bring
consistency and predictability for businesses and consumers,
enabling us to better focus on our core purpose - resolving
individual disputes quickly and with minimum formality."
The changes will complement government proposals to
modernise how the Financial Ombudsman assesses consumer
complaints, published today. The consultation includes plans to:
- Adapt the Financial Ombudsman's ‘fair and reasonable' test.
- Give the FCA more flexibility to manage mass redress events,
including pausing complaints handling without industry
consultation.
- Introduce a formal mechanism for the Financial Ombudsman to
refer issues that arise through its casework to the FCA on the
interpretation of the FCA's rules, where there is ambiguity in
how they apply.
- Allow firms and complainants to refer an issue to the FCA,
for clarity on its rules, before the Financial Ombudsman issues a
final decision.
- Introduce an absolute time limit for bringing cases to the
Financial Ombudsman of 10 years, subject to exceptions, for
example, for longer-term products.
The changes come as the Financial Ombudsman proposes to further
modernise its processes by, later this summer, consulting on the
introduction of different levels of case fees for financial
services firms, depending on the circumstances of a complaint, to
make the system fairer and support early resolution.
The Financial Ombudsman has also confirmed that, following
feedback from stakeholders, it will be changing the interest rate
it applies to some awards it directs businesses to pay, from 8%
to track the Bank of England's base (average) rate +1%. Awards
will still reflect any actual losses the consumer has suffered,
as now.
Notes to editors
- Read the FCA's and Financial Ombudsman's joint consultation
on modernising the redress
system
- Read HMT's consultation
- Read the Financial Ombudsman's announcement on compensation interest
rates
