5.1 The purpose of this chapter is to explain the way in which the ombudsman service will operate to ensure that consumer credit complaints may be resolved promptly and with minimum formality. It outlines:
5.2 In line with the principles proposed in chapter 2, we propose that the ombudsman service’s procedures for handling complaints under the CCJ should be the same as those that currently apply to complaints under the CJ and VJ. The proposed consumer credit rules in annex B reflect this.
5.3 When the ombudsman service first receives a complaint, it will consider whether it falls within jurisdiction. This includes an assessment of whether:
(a) the business complained about is covered;
(b) the complainant is covered;
(c) the activity is covered, and
(d) the complaint is within the relevant time limits.
5.4 The ombudsman service will also consider whether the complaint is one which should be dismissed without consideration of its merits (see paragraphs 5.13 to 5.14 below).
5.5 If the business has not yet had eight weeks to consider the complaint (and has not already sent its final response letter), the ombudsman service will refer the complaint back to the business concerned.
5.6 If the ombudsman service considers that it should not handle the complaint, because it is outside jurisdiction or because it is to be dismissed without consideration of its merits, it will give the complainant an opportunity to make representations before a decision is made. Once the ombudsman service has made a decision, it will inform both the complainant and the business. If the business considers that the complaint is not eligible to be handled by the ombudsman service, the ombudsman service will give both the business and the complainant an opportunity to make representations before a decision is made.
5.7 Once the ombudsman service has decided that it can handle a complaint, it will try to resolve it at the earliest possible stage and by whatever means appear to be most appropriate, including mediation or investigation.
5.8 If an investigation is necessary, the ombudsman service will first give both parties an opportunity to make representations. Following this, it will send a provisional assessment to both parties. If either party responds (by the deadline given), disagreeing with this assessment, the dispute will then go to an ombudsman to be formally “determined”.
5.9 Both parties will then be able to make further representations to the ombudsman. Most cases are decided by the ombudsman on the basis of the documents sent in by both of the parties. Complainants who wish to make recorded spoken representations can do so by arrangement. Either party may request a hearing by writing to the ombudsman setting out the issues they wish to raise and (if appropriate) any reasons why the hearing should be in private. The ombudsman will then decide whether the issues are material and whether a hearing should take place and, if so, whether it should be held in public or private. In taking this decision, the ombudsman will have regard to the provisions of the European Convention on Human Rights. In practice, only in a very few cases is a hearing considered necessary to achieve the fair determination of the complaint.
5.10 Under the Financial Services and Markets Act 2000 the ombudsman is required to determine a consumer credit complaint by reference to what is, in the ombudsman's opinion, fair and reasonable in all the circumstances of the case.
5.11 In considering what is fair and reasonable in all the circumstances of the case, the ombudsman will take into account the relevant law, regulations, regulators’ rules and guidance and standards, relevant codes of practice and, where appropriate, what the ombudsman considers to have been good industry practice at the time of the act or omission complained about.
5.12When the ombudsman has determined the complaint, the ombudsman will write to both the complainant and the business explaining the determination. The ombudsman will also invite the complainant to say, within a specified time, whether they accept or reject the determination. If the complainant accepts it, the determination is final and binding on both the complainant and the business. But if the complainant rejects the determination (or does not reply by the deadline set), neither the business nor the complainant will be bound by it. The ombudsman will inform the business of the complainant’s response (or lack of response).
5.13 There are certain circumstances where the ombudsman service may, but is not obliged to, dismiss a complaint early in the procedure without considering its merits. The rules set these out in full. The following is a list of those circumstances most likely to be relevant to consumer credit complaints. These are circumstances where the ombudsman service is satisfied that:
(a) the complainant has not suffered, and is unlikely to suffer, financial loss, material distress or material inconvenience;
(b) the complaint is frivolous or vexatious;
(c) the complaint clearly does not have any reasonable prospect of success;
(d) the business has already made an offer of compensation which is fair and reasonable, in relation to the circumstances alleged by the complainant, and which is still open for acceptance;
(e) the business has correctly applied the relevant regulatory requirements or guidance to the complaint;
(f) the matter has previously been considered or excluded by the ombudsman service (unless material new evidence likely to affect the outcome has subsequently become available);
(g) the matter has been dealt with, or is being dealt with, by a comparable independent complaints scheme or dispute-resolution process;
(h) the complaint has been the subject of court proceedings where there has been a decision on the merits;
(i) the subject matter of the complaint is the subject of current court proceedings;
(j) it would be more suitable for the matter to be dealt with by a court, arbitration or another complaints scheme;
(k) it is a complaint about the legitimate exercise of a business’s commercial judgement;
(l) the complaint involves more than one complainant, has been referred without the consent of the other complainant and it would be inappropriate to deal with the complaint without that consent;
(m) the complaint raises an important or novel point of law, which has important consequences and would more suitably be dealt with by a court as a test case; or
(n) there are other compelling reasons why it would be inappropriate for the complaint to be dealt with by the ombudsman service.
5.14 An example of where the ombudsman service would dismiss a consumer credit complaint without considering its merits - where the complaint is about the legitimate exercise of a business’s commercial judgement (example (k) above) - would be where the complaint is solely about the interest rate a lender has charged. It would be inappropriate for the ombudsman service to handle such complaints, as to do so would put it in the position of a becoming a price-fixer or regulator (which is not the ombudsman service’s role).
5.15 The government confirmed this position in its feedback statement following its December 2003 consultation on the proposed ombudsman arrangements for consumer credit. Confirming that the Financial Ombudsman Service’s existing procedures on this would be continued, the government said: “The Financial Ombudsman Service does not consider disputes which revolve entirely around allegedly excessive interest rates, as the setting of interest rates is considered to be the proper exercise of a firm’s commercial judgement. This is a matter which is more appropriate for the courts to deal with. However, a dispute in which the level of interest charged is only an element may be considered [by the ombudsman service] on its other merits.”
5.16 The ombudsman service has significant discretion to decide the evidence it needs to have in order to determine a complaint. It has the discretion to decide, for example, whether such evidence should be oral or written. Furthermore, in line with the provisions of the Civil Justice Rules that apply in court, the ombudsman service may decide what evidence is admissible or not.
5.17 Where necessary or appropriate, the ombudsman service can accept information in confidence so that only an edited version, or (where this is not practicable) a summary or description, would be disclosed to the other party. This could include, for example, confidential information about third parties or security information.
5.18 The ombudsman service will take into account any failure by a complainant or business to provide information that it has requested, and may dismiss a complaint if a complainant fails to supply required information.
5.19 The ombudsman service may fix time limits, or extend those already provided for, in order to resolve a complaint. If a business does not comply with a time limit, the ombudsman service may proceed to the next stage of the process. It may also, if appropriate, take into account any material distress or inconvenience caused by this in any award made. If a complainant does not comply with a time limit, the ombudsman service may either proceed to the next stage of the process or dismiss the complaint.
5.20 If a complaint is determined in favour of the complainant, the ombudsman may do one or more of the following:
(a) make a money award against the business; and/or
(b) require the business to take such steps in relation to the complainant as the ombudsman considers just and appropriate (whether or not a court could order those steps to be taken); and/or
(c) award costs and/or interest against the business.
5.21 A money award may include such amount as the ombudsman considers fair compensation for financial loss (including consequential or prospective loss), pain and suffering, damage to reputation, distress or inconvenience. The maximum money award an ombudsman may make is £100,000. If the ombudsman considers that an amount of more than £100,000 is required as fair compensation, then the ombudsman may, in addition, recommend to the business that it pays the balance.
5.22 An award of costs may include an amount which covers some or all of the costs reasonably incurred by the complainant in connection with the complaint. Such awards are likely to be exceptional, as in most cases complainants should not need to use professional advisers to bring complaints to the ombudsman service.
5.23 The ombudsman service may, in addition, require reasonable interest to be paid on the money award and/or the costs. Neither the interest to be paid nor the costs themselves count towards the £100,000 limit.
5.24 A business is obliged to comply promptly with any award made against it, any direction given under (b) above or any settlement which it agreed at an earlier stage of the procedures. A money award can be recovered or enforced through the courts by the complainant. The complainant may also enforce a direction under (b) by injunction or (in Scotland) by order.
5.25 The ombudsman service may refer a complaint to another complaints scheme if it considers that the complaint is more suitable to be dealt with by that other scheme, provided the complainant agrees to this.
5.26 The ombudsman service must have regard to the parties’ rights of privacy in dealing with any information it receives in connection with a complaint. It may disclose this information to the other parties to a complaint, or if it is otherwise required or authorised by law to do so. This could either be in full or, where necessary or appropriate, in an edited form or (where this is not practicable) in summary or description.
5.27 So long as it has regard to the parties’ rights of privacy, the ombudsman service may also disclose information to a body exercising regulatory or statutory functions, such as the OFT or the FSA. This would be to enable that body, or the ombudsman service, to discharge its functions. An example of this would be where evidence comes to light that a business or complainant has broken the law. Under such circumstances it would be appropriate for the ombudsman service to inform the relevant enforcement authority.