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Complaints-handling rules:

dealing with complaints about banks and general insurance companies based outside the UK response to our consultation paper issued in November 2001

28 March 2002

1. executive summary

1.1
We issued a consultation paper in November 2001, setting out a proposal for extending the territorial scope of the Financial Ombudsman Service's Voluntary Jurisdiction (VJ).

1.2
We issued the consultation paper following representations from several overseas firms which had expressed an interest in joining the ombudsman scheme. Several of these firms were members of predecessor ombudsman schemes.

1.3
We considered it might be of benefit to these firms and their customers if we allowed their voluntary participation in the scheme, subject to certain conditions. Accordingly, we proposed changes to the VJ rules, to enable general insurance companies and banks based outside the UK, but within the European Economic Area (EEA), to join the scheme.

1.4
We invited comments on these proposals. This paper provides feedback on the responses we received to the proposals set out in the consultation paper. It also includes the revised rules.

1.5
The revisions and guidance to the rules are set out at Annex A [PDF opens in new window]. The rules were made by the Financial Ombudsman Service on 22 March 2002 and are in effect.

1.6
The rules, which cover the territorial scope and types of firm under the Financial Ombudsman Service's Voluntary Jurisdiction, will be published in Chapter 2 of FSA's Complaints Sourcebook (Jurisdiction of the Financial Ombudsman Service).

2. status of the rules

2.1
The rules at Annex A [PDF opens in new window] of this paper have been approved by the Board of the FSA and are legally "made".

3. results of the consultation

3.1
We received nine responses to the consultation paper from firms and regulatory bodies. Respondents generally welcomed the modification proposed to the VJ. Below (paragraphs 3.2 to 4) is a summary of the responses we received, with our commentary.

3.2
Territorial restrictions

3.2.1
The consultation paper sought views on the extent to which the territorial scope of the Voluntary Jurisdiction might be extended to cover firms operating outside, but directing trade into, the United Kingdom.

3.2.2
Firms based in the EEA
Interest was shown by some firms operating outside the United Kingdom, but within the EEA, to participate in the Voluntary Jurisdiction. In particular, interest was expressed by insurance firms based in Ireland. The rules have therefore been amended to admit EEA firms (DISP 2.7.2R).

3.2.3
Firms based in the Channel Islands
Although firms based in the Channel Islands appeared to favour joining the Voluntary Jurisdiction in the short term, they considered it was likely they would withdraw from the Financial Ombudsman Service once the Jersey and Guernsey ombudsman schemes started to operate in about a year's time. For that reason, we do not consider it practical to extend the Voluntary Jurisdiction to the Channel Islands for such a short period.

3.2.4
Firms based in the Isle of Man
There was no significant interest on the part of firms operating in the Isle of Man in joining the Voluntary Jurisdiction of the Financial Ombudsman Service, principally as a result of the recent introduction of the local Isle of Man ombudsman scheme.

3.2.5
Firms based in Switzerland
A request was made that Switzerland-based firms directing their trade into the UK should be allowed to participate in the Voluntary Jurisdiction. Although we have consulted on extending the Voluntary Jurisdiction to firms based within the EEA, we do not propose to extend the jurisdiction further at the present time. Firms in the EEA are subject to a common framework of regulation, and EEA firms authorised outside the UK can trade in the UK without needing specific UK authorisation. Extending the jurisdiction to cover firms in countries operating outside the EEA would involve issues such as the appropriateness of the regulatory regime for the firms concerned.

3.3
Restrictions on overseas jurisdiction

3.3.1
The consultation paper sought views on whether the Voluntary Jurisdiction should preclude services not based on UK law - and also complainants who were not resident in the UK.

3.3.2
Firms whose trade is not directed into the UK We received no request to extend the jurisdiction to firms whose trade was not directed into the UK.

3.3.3
The restriction of the voluntary jurisdiction to products and services based on UK contract law only
There were some concerns that customers of firms which use contracts not based on UK law would be precluded from having their disputes considered by the Financial Ombudsman Service. However, this appeared to be principally a matter of concern for Isle of Man-based firms which in general were not interested in participating in the Financial Ombudsman Service's Voluntary Jurisdiction.

3.3.4
Whether residential tests or restrictions should be applied to complainants
There was a mixed response as to whether the Financial Ombudsman Service's Voluntary Jurisdiction should be restricted to UK residents. No change to the rules on this issue has been made. Therefore complainants will remain eligible under the VJ regardless of where they reside. However, firms will be required to notify their Home State regulator of their participation in the VJ.

3.3.5
Firms participating in more than one ombudsman scheme
Concerns were raised that, where a firm belonged to more than one ombudsman scheme (such as their local scheme as well as the Financial Ombudsman Service), this might cause confusion for their customers - and possibly for their regulators. The rules do not need to reflect this, but this is an issue to be noted for relevant firms.

3.4
Activities to be covered

3.4.1
The consultation paper sought views as to whether the scope of the activities carried out should be limited to banking and general insurance related activities.

3.4.2
Combined general and life policies
Requests were made from firms offering long-term cover to be included in the proposal. This was regarded to be of particular benefit to firms based in Ireland offering creditor insurance polices which combine elements of life and general insurance cover. The rules have therefore been amended, to allow long-term insurance (eg life insurance) which is ancillary to general insurance to be included in the Voluntary Jurisdiction (DISP 2.6.11 R).

4. main changes to the rules

4.1
Following the responses to the consultation paper, the "made" rules in Chapter 2 have been amended to: extend the territorial scope of the Voluntary Jurisdiction to the EEA (DISP 2.7.2R); provide for the handling of complaints about Voluntary Jurisdiction participants based outside the United Kingdom, but within the EEA, which relate to insurance and banking business, including ancillary long-term insurance business (DISP 2.6.9R, 2.6.11R).

5. amendment to guidance and to standard terms

5.1
The minor changes set out in Annex A [PDF opens in new window] have been made to guidance in Chapter 1 and to a standard term in Chapter 4 of the rules, as a consequence of the main amendments which are the subject of this response. This standard term has been amended so as to exclude the operation of DISP 1.1.1R which limits the application of chapter 1 to firms carrying on activities from an establishment in the UK: The change to guidance has been made by the FSA and the amended standard term made by the Financial Ombudsman Service with the approval of the FSA.

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