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ombudsman news

issue 95

July / August 2011

ombudsman news "Q&A" page

what's the ombudsman's approach to complaints involving 'basic advice' and 'simplified advice'?

We are already used to dealing with complaints about many financial products where there is no specific 'suitability' or 'know your customer' regulatory requirement. In such cases - as long as consumers have not been misled - we expect people to be responsible for their own choice.

We assess any complaint we deal with involving the sale of a 'stakeholder product' on the understanding that the consumer received 'basic advice'. So we will not, for example, expect the adviser to have completed a 'fact find' or to have made detailed enquiries to 'know the customer'. As with other products, we take the FSA's rules and guidance into account. We also look at good industry practice.

'Simplified advice' processes must comply with the same regulatory requirements as those involving full advice, including the requirement that the advice has to be 'suitable'. But in any complaints we might receive, we would judge the advice in the specific context in which it was given. So we would not expect a full 'fact-finding' exercise. But we would look at the questions asked and the options open to the particular consumer concerned.

Where the 'simplified advice' involves an automated process, we would look - as part of our consideration of any complaint - at whether there was a good record of the information the consumer gave and the choices they made.

why don't you have a hearing in every case? I thought this was necessary to comply with human rights law.

We are an alternative to the court system and aim to resolve disputes as quickly, cost-effectively and informally as we can. We can nearly always get to the bottom of complaints - and recommend solutions or make decisions - on the basis of the information, facts and arguments that each side gives us in writing and on the phone.

Some people might want their 'day in court' - to personally cross-examine the other party and challenge the ombudsman in person. But we do not operate as a traditional court of law. We do not have the power to take evidence on oath and test it by cross-examination, or to compel witnesses and/or third parties to attend. The cost involved in organising and holding hearings is another reason why they are not a standard part of our process.

It is only very rarely that we consider oral hearings necessary or helpful. In the small number of cases where we do decide to hold an oral hearing, the ombudsman conducting the hearing decides what procedure to follow and what questions to ask. The ombudsman ensures that neither side is intimidated or disadvantaged by the process.

We are satisfied that our approach to oral hearings complies with human rights requirements. And a judgment from the European Court of Human Rights in June 2011 (Heather Moor & Edgecomb Ltd v the United Kingdom) confirmed that the ombudsman operates fully within the rule of law and complies with the European Convention on Human Rights.

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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.