Financial Ombudsman Service and FCA move to modernise redress system

While the current system works well for individual complaints about specific issues, sudden and significant increases in complaints can cause firms to struggle to effectively respond, delaying any customer redress that may be due. The problem can be intensified if large numbers of complaints are submitted on behalf of consumers by professional representatives.

The FCA and the Financial Ombudsman Service are seeking views on how to prevent financial issues leading to a spike in complaints and creating uncertainty for firms and their customers. The announcement comes as the Chancellor called for greater synergy between the FCA and the Financial Ombudsman Service to create more predictability for financial firms so they can invest, innovate and deliver sustainable economic growth.

Together with the FCA, we want the Call for Input to help ensure that:

• Consumers receive appropriate redress when things go wrong.
• Firms identify harm at an early stage, proactively address it, and resolve complaints more effectively themselves, reducing the need for consumers to complain to us.
• Redress issues can be identified earlier so they can be resolved swiftly and efficiently.
• Communications with consumer and industry stakeholders are improved, making it quicker and easier to flag matters with wider market implications.

Today’s Call for Input makes it clear that an effective redress system is vital for consumer protection, market integrity and competition, as well as the FCA’s secondary objective to facilitate the international competitiveness and growth of the UK economy.

The Dispute Resolution (DISP) rules which dictate how firms and the Financial Ombudsman Service handle complaints were last reviewed ten years ago – since then the landscape has changed significantly with several mass redress events and increasing levels of complaints brought by professional representatives.

The Call for Input will be an opportunity to explore ways to bring the rules up to date, helping create an effective redress framework fit for the future.

James Dipple-Johnstone, Deputy Chief Ombudsman at the Financial Ombudsman Service said:

“Every year we help resolve difficult disputes for consumers and businesses – providing impartial help in often challenging circumstances. We are committed to continuously improving our service and helping create a redress framework fit for the future.

“We have seen how large volumes of complaints in particular areas can impact the effectiveness of the system. By further strengthening our work with the FCA and industry, we can identify and address these issues more promptly to ensure better outcomes for all.”

We have also signed a refreshed Memorandum of Understanding (PDF 158KB) to ensure we can work better with the FCA and share insights on issues which may result in a broader market impact.

The Terms of Reference of the Wider Implications Framework have also been updated.

Professional representatives have been bringing increasing numbers of cases to us. Where a complaint is upheld, many go on to charge a significant percentage of any redress awarded. While these representatives have a role to play in the redress system, we are also receiving large numbers of poorly articulated complaints from them which increases our costs.

We consulted on a fairer fee model which would see professional representatives charged to bring cases to our service. Today we've published feedback on that consultation (PDF 229KB) setting out the intention to proceed with a charging regime, subject to the relevant Parliamentary and FCA approvals being given.