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ombudsman news

issue 60

March/April 2007

ombudsman focus - credit where it's due

Following the widening of our remit from 6 April 2007, the Financial Ombudsman Service is pleased to welcome businesses with a consumer credit licence. Our new responsibility for handling disputes involving consumer credit came about through the Consumer Credit Act 2006.

It means that, for the first time, customers of all businesses which hold a standard consumer credit licence will have access to a dispute-resolution scheme other than the courts.

We asked Jane Hingston, lead ombudsman for banking and credit, to tell us more.

is it a logical development for the ombudsman's remit now to cover consumer credit-

For me, this latest extension of our service just seems like a natural progression. Our remit has been gradually widening since the ombudsman service was first created.

Businesses with a consumer credit licence already come under our so-called "compulsory" jurisdiction if they're also regulated by the Financial Services Authority (FSA). That's not going to change. The rules governing our existing compulsory jurisdiction have simply been amended to include consumer credit activities from 6 April 2007. So we'll cover all businesses holding standard consumer credit licences (as issued by the Office of Fair Trading).

So yes, it's a logical development. And it benefits everyone. We'll be able to provide the same kind of dispute-resolution service for all consumers - taking a consistent approach to disputes involving both FSA-regulated firms and businesses with a consumer credit licence.

what sort of complaints will the ombudsman service now be able to consider that it couldn't before-

We will be able to look at disputes involving businesses with a consumer credit licence in areas relating to consumer credit and hire, credit brokerage, debt adjusting, debt counselling, debt collecting and the operation of a credit reference agency. The other consumer credit categories (such as debt administration and provision of credit information services) will be added to our remit from 6 October 2008. However, we'll not be able to look at consumer credit complaints relating to events that took place before 6 April 2007.

So we certainly aren't envisaging an immediate flood of complaints which might have been stored up for years!

how has the ombudsman prepared for its new remit-

We had to ensure we had a good understanding of the particular issues the new consumer credit complaints are likely to involve. So we have had comprehensive discussions with consumer advice and advocacy organisations, as well as with the wide range of consumer credit industry bodies.

We also had to ensure that businesses knew about the changes, so our communications programme has been extensive. We seemed to spend most of 2006 spreading the word to any consumer credit stakeholders who would listen! Our external liaison team and ombudsmen have hosted seminars, run a nationwide series of roadshows and taken part in consumer and trade events. We would certainly hope that stakeholders are now aware of - and prepared for - the new consumer credit complaints-handling arrangements, including the role of the ombudsman service.

has the ombudsman service had to do much internal preparation or retraining-

Our current involvement in banking and credit complaints has already provided us with a wealth of experience and knowledge. Around 70% of consumer credit (areas such as plastic cards and loan products) is provided by banks, building societies and other lenders. And these are already covered by the ombudsman service. There are, of course, going to be some new areas and we have invested considerable time in preparing our staff so they are able to deal with these new complaints.

We also have significant experience of dealing with complaints about activities such as debt collecting and debt advice - so it's not surprising that many of the topics that come up in discussions with consumer credit businesses are already familiar to us.

will you be able to offer any support in the early stages of a potential complaint-

Absolutely. We can work with businesses to help reduce the likelihood of their customers ever needing to refer disputes to us. By identifying common problems and outlining our usual approach to putting things right, we can save them valuable time and resources.

We will also be offering ongoing support to help businesses with a consumer credit licence understand how the new rules on complaints-handling apply to them. The rules were finalised on 14 December 2006. They require businesses to have proper complaints-handling procedures in place. This means they have to refer customers to the ombudsman service if the complaint is not resolved.

We realise that in the early days (and particularly for small consumer credit businesses) there may be a settling-in period while people get used to our process. We will aim to help businesses through that.

are consumer credit businesses welcoming this change-

The message I hear most is that businesses want to act professionally and responsibly - to be seen by their customers as fair and focused on providing good service. When looking to reinforce this message of reassurance and professionalism, consumer credit businesses will, I hope, be proud to say that they are covered by the Financial Ombudsman Service.

the resources we offer businesses include:

  • Our technical advice desk, dedicated to answering queries from businesses about the ombudsman service and our general approach (call 020 7964 1400 or email)
  • Regular issues of this newsletter, ombudsman news, providing articles and case studies showing our approach to the wide variety of cases referred to us
  • Our website, containing a wealth of information including a special section for businesses
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ombudsman news issue 60 [PDF format]

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.