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final rules published on complaints handling and the new Financial Ombudsman Service

14 December 2000, FSA/PN/160/2000

Rules on the new complaint handling arrangements were published today by the Financial Services Authority (FSA) and the Financial Ombudsman Service. The rules require financial services firms to deal properly and promptly with consumer complaints and they set out the scope and operation of the Financial Ombudsman Service. The rules will apply when the Financial Services and Markets Act comes into force.

The complaint handling rules for firms set out the standards which all firms' complaints procedures must meet, including the time limits within which firms must handle consumer complaints. The rules covering the scope and operation of the Financial Ombudsman Service include rules on who may refer a complaint to the Service and which firms' activities are covered.

Today's publication of "final" rules follows extensive consultation. The draft rules published for consultation earlier this year were generally well received and there has been no need for any major policy changes. However, some of the rules have been amended to clarify their meaning and further guidance has been added.

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

These rules are a key element of the regulatory framework to protect financial services consumers. They will enable retail customers to get their problems dealt with quickly and effectively. Standards of complaint handling by retail firms should improve. Where problems persist and consumers remain dissatisfied with the way a firm has dealt with their complaint, the independent Financial Ombudsman Service will be available.

Walter Merricks, Chief Ombudsman, said:

"The Financial Ombudsman Service is already functioning as the central contact point for consumers with unresolved complaints about financial firms. We have brought the staff from the separate dispute-resolution schemes together under one roof, and we now operate as a single organisation. The publication today of the single set of rules brings us a step closer to finalising the formal framework under which we shall be authorised to work when the new Financial Services and Markets Act is brought into force."

Key requirements in the rules on firms' complaint handling procedures are:

  • that firms must have in place and operate appropriate and effective internal complaint handling procedures and that consumers are made aware of these procedures;
  • that firms must aim to resolve complaints within eight weeks and must notify complainants of their right to go to the Financial Ombudsman Service if they remain dissatisfied; and
  • that firms must report information about their complaints handling to the FSA twice yearly.

Key provisions in the rules relating to the Financial Ombudsman Service are that:

  • all authorised firms are covered by the Financial Ombudsman Service on a compulsory basis;
  • access to the Service is open to private individuals and small businesses with an annual turnover of less than £1million;
  • the Ombudsman can make a maximum money award of £100,000; and
  • certain complaints may be dismissed without consideration of the merits of the case, including those that the Ombudsman considers to be frivolous or vexatious.

notes for editors

  1. As part of the regulatory reform under the Financial Services and Markets Act (FSMA), the eight existing complaints-handling and ombudsman schemes which currently cover the financial sector will be brought together to form the Financial Ombudsman Service.
    The existing schemes are:
    The Personal Investment Authority Ombudsman Bureau;
    The Insurance Ombudsman Bureau;
    The Office of the Banking Ombudsman;
    The Office of the Building Societies Ombudsman;
    The Office of the Investment Ombudsman;
    The SFA Complaints Bureau;
    The FSA Complaints Unit; and
    The Personal Insurance Arbitration Service.
  2. The framework for the new Financial Ombudsman Service is set out in FSMA. FSMA provides for a mechanism under which "certain disputes may be resolved quickly and with the minimum of formality by an independent person".
  3. Significant progress has been made to bring together the existing dispute resolution schemes in advance of the implementation of FSMA, and the establishment of the new Financial Ombudsman Service is now well advanced. The new organisation which is to operate the Service had been set up, with Andreas Whittam Smith as its Chairman and Walter Merricks as Chief Ombudsman.
  4. At the beginning of April 2000 the Financial Ombudsman Service assumed day-to-day responsibility under service level agreements for running the existing complaints-handling schemes which it is due to replace at "N2" (the date on which the Financial Services and Markets Act is brought into force). However, the rules of each of the existing schemes continue in force until "N2".
  5. The staff of the existing ombudsman and complaints-handling schemes transferred on to Financial Ombudsman Service contracts on 1 April 2000 and moved into joint premises at South Quay, Docklands, during April 2000.
  6. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and fighting financial crime.
  7. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.
  8. "Complaints handling arrangements. Response on CP49: a joint policy Statement" is available on the FSA Website or from the FSA Publications Department.

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