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new complaints handling rules proposed to underpin new ombudsman scheme

10 November 1999

New rules to tighten up complaints handling by financial firms are set out in a consultation paper published jointly today by the Financial Services Authority and the Financial Services Ombudsman Scheme (FSOS). The paper also proposes detailed arrangements for the new Ombudsman scheme to which customers who have unresolved disputes can refer complaints.

The consultation proposes rules to provide time limits for responding to complaints and to set standards for responses. The FSA is proposing rules to govern the way all regulated firms deal with customer complaints. The Consultation Paper proposes that to ensure consistently high standards, all FSA authorised firms who provide products and services to consumers will need to:

  • Publish their complaints policies and procedures;
  • Investigate all the complaints promptly and effectively;
  • Inform customers who remain dissatisfied at the end of the complaints process of the new Ombudsman arrangements;
  • record all complaints and submit statistics on volume and type to the FSA.

Christine Farnish, Director of Consumer Relations at the FSA said:

This is good news for consumers. With some notable exceptions, the financial services retail sector has some catching up to do when it comes to standards of customer service. The more enlightened firms already recognise that it is good for business to have an effective complaints handling system.

The Consultation Paper also puts forward detailed proposals for the new single Financial Services Ombudsman. These have been drawn up jointly by the Financial Services Authority and the Financial Ombudsman Scheme. They set out the scope of the new Scheme and how it should be funded.

Walter Merricks, Chief Ombudsman of the FSOS, said:

This marks a milestone in our plans for the new service. Last week we secured accommodation for our new headquarters. We are well on course to be ready to offer consumers the convenience of a single ombudsman next autumn. Today the framework of rules under which we will operate is published. The new internal complaint rules under which we will operate are published. They will mean that we should only receive complaints where there is a real dispute that cannot be resolved by the firm.

The paper also proposes that the Ombudsman should be able to make binding awards of up to £100,000 - the same as the limit in most existing schemes.

The following firms will be subject to a compulsory scheme:

  • Firms currently conducting investment business under the Financial Services Act
  • Building Societies
  • Banks (currently subject to voluntary arrangement)
  • Insurance companies (currently subject to voluntary arrangement)
  • Friendly societies
  • Members of professional bodies (for example, lawyers, accountants and actuaries) who require FSA authorisation (currently subject to an RPB scheme for complaints).

The FSA proposes that all financial services activities carried out by authorised firms which are currently covered by existing Ombudsman and other relevant dispute resolution schemes should be covered on a compulsory basis by the new Scheme. This means that a wide range of activities would be covered by the Scheme, including mortgage lending by banks and building societies, the sale of general insurance and investment business services provided by stockbrokers, IFAs and life assurance companies. The Ombudsman Scheme will be able to extend the coverage to other firms and sectors by voluntary agreement in due course.

The scheme is like to cost in the region of £20m per annum and it is proposed that half of the costs would be recovered in a way which reflects the extent to which individual firms use the Scheme.

A general levy will ensure that all firms which might give rise to a complaint contribute towards the cost of the scheme. This will reflect the important consumer confidence benefit they will all derive. The CP also proposes that the burden on small firms be moderated to ensure that they do not bear a disproportionate cost.

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