8.1 My business is FSA-regulated and so is already covered by the ombudsman service under the compulsory jurisdiction (CJ). Once the consumer credit jurisdiction (CCJ) is open, will we be covered by both jurisdictions or will we be able to choose which we are covered by?
You will be covered by the CJ alone. Businesses authorised by the FSA and which are also licensed by the OFT will remain in the CJ, which will cover their consumer credit complaints.
The consumer credit rules we are proposing broadly mirror those of our existing CJ and VJ. In order to provide a simple and consistent regime for everyone, we propose some changes to the CJ and VJ rules in terms of what activities are covered, so that all three jurisdictions are harmonised to the maximum extent possible.
This should ensure that users of the service experience the seamless complaint coverage that the arrangements are intended to achieve. It also means businesses will not have to be covered by more than one mandatory jurisdiction so will not, for example, have to pay levies in both the CJ and CCJ.
8.2 When will the ombudsman service start considering complaints under the new CCJ, and what about complaints about events that have already happened?
It is expected that the CCJ will open on 6 April 2007 for all activities except debt administration and the provision of credit information services (for which the opening date is expected to be 1 October 2008). These are the dates from which we expect formally to start dealing with complaints under the CCJ.
The CCJ will not deal with complaints about events that happened before 6 April 2007. But we may need to refer, during our investigations, to earlier events - in order to determine a complaint about something that happened after 6 April 2007.
We expect considerable interest in the CCJ from around January 2007, so staff in our front-line customer contact division will be trained to deal with early consumer enquiries about the jurisdiction.
We also plan to provide support to businesses in the months running up to the new jurisdiction. We have already begun to work with consumer credit trade bodies in preparing for the new jurisdiction, and this work will gather speed through the rest of 2006.
8.3 Why is the dispute resolution function being provided before the new licensing regime is in place - shouldn’t they happen at the same time?
Because the ombudsman service provides only dispute resolution, and does not have any regulatory function, the CCJ does not need to mirror the timetable of the new licensing regime.
Within both consumer groups and consumer credit trade bodies, there is considerable appetite for the early availability of the informal, flexible and accessible complaint resolution that an ombudsman service can offer. Most stakeholders regard an ombudsman service as a more appropriate forum than the courts for the majority of consumer credit complaints.
We already deal with significant numbers of consumer credit complaints against businesses in our CJ and VJ, and have the capacity to deal with more of them as work in some other areas begins to level off. So there seems no obvious benefit to be gained by delaying the start of the CCJ.
8.4 Will a business get its case fee waived if you find in its favour on a case?
No. That is because the purpose of the case fee is to pay (wholly or partly) for the costs of case handling - not to "fine" a licensee for doing something wrong. Our costs for considering the case will be the same, whatever the outcome. Furthermore, if receipt of our case fee depended on the outcome of the case, we might be seen to have an incentive to find against businesses, and our impartiality could be questioned.
8.5 My business normally refers complaints to our trade body, who handles them for us. Will we still be able to do that?
Yes. There is no reason why you cannot use your trade body to provide your initial complaint-handling function, provided you make it clear to the customer that the trade body is acting for you, the trade body sticks to the appropriate time limits, and you make sure the customer is given referral rights to the ombudsman service if the complaint remains unresolved.
We are planning workshops for businesses and trade bodies to explain how our complaint process works.
8.6 Is every case seen and decided by an ombudsman?
No. For our existing consumer credit complaints, less than 10% need to be decided by an ombudsman. They are usually the more complex cases, or those presenting new points.
The vast majority of complaints are resolved more informally, often through mediation by the adjudicators in our casework teams. We are often able to resolve cases informally after phone conversations with the consumer and the business, saving both sides the time and effort of providing full written submissions.
However, if either the consumer or the business disagrees with the adjudicator’s view of a complaint, they have the right to an ombudsman’s decision on the case.
8.7 How will my business know the way in which the ombudsman service is likely to approach a particular type of complaint?
As well as hosting workshop events for business, we provide information on our website and in our publications such as ombudsman news. We have also created a special section of our website consumer credit resource businesses. As the CCJ draws nearer, we will be providing more ombudsman news articles that cover areas of interest to CCJ participants.
If you have a complaint that has not yet been referred to us, our technical advice desk can give you a "steer" when you do not know how to proceed. You can contact the technical advice desk on 020 7964 1400 or by email.
If you have a complaint that has been referred to us, you can talk to the adjudicator about the case. We are impartial, and so can provide help to both parties to the complaint in arriving at an appropriate outcome.
8.8 What opportunity will I get to put my side of the case, and what sort of "proof" will I be expected to provide?
We do not make up our minds about the merits of a complaint until we have heard both sides’ arguments, and weighed up the evidence.
Typically, evidence might include copy documents (such as a loan application form and agreement), contemporaneous notes or correspondence, and written statements from the parties about what happened. Much will depend on the nature of the complaint.
We guide the parties about what form of evidence they should provide, and issue questionnaires if we need them to answer specific questions. We frequently discuss the case with the parties by phone, but it is rare for us to require them to attend a hearing.
8.9 How will the ombudsman service decide who wins the case?
We question the parties, and then make up our own minds about the case. Where there is a dispute about what happened, we decide what happened on the balance of probabilities in the light of the evidence that is available now.
We take into account the law, any relevant regulations and codes of practice, and good industry practice. The law requires us to decide cases on the basis of what is fair and reasonable in all the circumstances.
Because most of our cases are resolved informally (often by means of mediated settlements) and because we consider what both sides did (or failed to do), there may not always be a clear "winner" or "loser".
8.10 How can we be sure that the ombudsman service has the necessary knowledge and experience to deal with complaints about consumer credit?
The Financial Ombudsman Service has always dealt with complaints about consumer credit, because we already cover firms that provide about 70% (by monetary value) of UK consumer credit.
We have extensive experience of dealing with complaints about credit cards, personal loans and lines of credit such as overdrafts. We already cover complaints about debt collection and recovery by businesses in our CJ. We also deal with complaints about leasing and debt factoring services, where they are ancillary to a banking service.
We will be providing thorough training to our adjudicators, so they fully understand all the new consumer credit products and activities - and will also be training our staff in the technical provisions of the Consumer Credit Act 2006. However, this will mainly be building on our existing knowledge.
8.11 How will the ombudsman service deal with complaints about the interest rate that a customer is charged?
Because we are not a price-fixer or regulator, we do not generally investigate complaints that are solely about the rate of interest that a lender charges.
Our existing CJ and VJ rules include provision for us to decline to deal with a complaint if it relates to a business’s legitimate exercise of its commercial judgement. That provision is replicated in the CCJ as well. Furthermore, the government in its White Paper "Fair, Clear and Competitive: The Consumer Credit Market in the 21st Century" did not envisage the ombudsman service being a vehicle for addressing unfair or excessive interest rates.
8.12 How will the ombudsman service deal with the new challenge created by the need to apply the ‘unfair business relationship’ provisions of the Consumer Credit Act 2006?We have always had to decide cases on the basis of what is fair and reasonable in all the circumstances of the case. So this does not represent a new challenge for us. Because of that, we do not anticipate having to change our normal approach when assessing complaints under the new provisions.
8.13 Will the Financial Ombudsman Service deal only with complaints that allege a breach of the Consumer Credit Act?
No. The test for us is that the complaint (and the complainant) must fall within our rules. So we could uphold a complaint where there had been no breach of the Act if the business has done something else wrong. But, equally, if there has been a breach of the Act but the complainant has been caused no loss or inconvenience by it, then we would be unlikely to uphold the complaint.
8.14 Can "class actions" be brought by customers through the Financial Ombudsman Service?Our procedures do not provide for class actions, or joint complaints by groups of consumers. We deal with each case individually, in confidence. Where we receive a cluster of cases about the same thing, we may administer the complaints as a group so as to avoid duplication of effort and ensure consistency in decision-making. But each complaint is still decided separately on its merits.
8.15 My business receives complaints under section 75 of the Consumer Credit Act 1974, which require a judgement to be made about the standard or quality of goods bought with credit. How will the Financial Ombudsman Service be able to deal with this sort of complaint?
This is an area with which we are already very familiar from our existing credit card work. Sometimes these complaints present difficulties of evidence that make them unsuitable for us to determine, and more suitable for a court. However, the majority of the section 75 complaints we receive are capable of being decided by us. We take a common sense, practical approach to the problem. For example:
8.16 Why have you not provided for consumers to pay a complaint fee or deposit?
The law as made by Parliament does not allow for us to make such a charge. The government decided that the ombudsman service should be free for consumers. A fee or deposit would be a barrier to disadvantaged consumers.