The Financial Conduct Authority (FCA) and the Financial Ombudsman Service (FOS) have released a joint Call for Input aimed at modernising the UK’s financial redress framework. This initiative seeks to address critical challenges in resolving consumer disputes effectively and efficiently, particularly during “mass redress events” that involve a surge in complaints due to systemic issues. The consultation, open until January 30, 2025, invites feedback from a wide range of stakeholders, including consumers, firms, professional representatives (PRs), and policymakers.
Key Challenges in the Current Framework
The Call for Input highlights several pressing issues within the existing redress system:
- Mass Redress Events: These events, often triggered by widespread harm across multiple firms or markets, can overwhelm firms and the FOS. Examples like Payment Protection Insurance (PPI) mis-selling and British Steel Pension Scheme (BSPS) complaints have revealed inefficiencies in handling such cases. Delays in resolving complaints erode consumer confidence and increase operational burdens for firms.
- Role of Professional Representatives (PRs): While PRs like claims management companies can support consumers in seeking redress, some charge fees for their services, reducing the compensation consumers receive. Furthermore, PRs have been criticised for submitting poorly evidenced complaints in bulk, straining the FOS’s resources.
- Alignment between FCA and FOS: Divergences in interpreting regulatory requirements can lead to inconsistent outcomes for consumers and firms, underscoring the need for closer collaboration between the FCA and FOS.
- Evolving Regulatory Landscape: The shift to outcomes-focused regulation, exemplified by the FCA’s Consumer Duty, requires firms to proactively prevent harm and ensure better consumer outcomes. However, this approach demands clarity and consistency in regulatory expectations.
Proposed Reforms
The Call for Input outlines a range of options to enhance the redress framework:
- Improved Early Intervention: Encouraging firms to identify and address systemic issues proactively, potentially through clearer guidance in the FCA’s Dispute Resolution (DISP) rules.
- Revisiting Complaint Handling: Exploring the reinstatement of a two-stage complaint process or introducing new safeguards to ensure complaints are resolved fairly before escalating to the FOS.
- Differentiating PR Cases: Considering stricter requirements for complaints submitted by PRs to ensure they are properly evidenced, potentially coupled with new dismissal grounds for bulk submissions of meritless claims.
- Strengthened FCA-FOS Collaboration: Enhancing the Wider Implications Framework (WIF) to ensure significant issues are identified and addressed collaboratively. Proposals include pausing complaint time limits while regulatory solutions are developed.
- Revised Time Limits: Reviewing the six-month and six-year time limits for referring complaints to the FOS, with considerations for a potential “longstop” on older complaints.
- Addressing Mass Redress Events: Introducing mechanisms for pausing complaint handling requirements during systemic issues, allowing the FCA to assess harm and develop appropriate responses.
Next Steps and Stakeholder Engagement
The FCA and FOS aim to ensure that reforms balance consumer protection, market integrity, and the competitiveness of the UK’s financial sector. Stakeholders are encouraged to provide input on how the redress framework can be modernised to better manage disputes, support fair outcomes, and enhance the system’s resilience to mass redress events.
Responses to the Call for Input will inform future consultations, with a summary of feedback and proposed actions expected in mid-2025.
For more details, stakeholders can access the full Call for Input document on the FCA’s website or submit their views via the online form, email to redressmodernisationcfi@fca.org.uk or in writing to:
Redress & CMC Policy Team
Financial Conduct Authority
12 Endeavour Square
London
E20 1JN
