FOS and FCA announce updates to redress system

The Financial Ombudsman Service (FOS) and the FCA have announced plans to “modernise and transform” the redress system.

The redress system is the mechanism by which compensation for customers who have suffered losses due to misconduct, mis-selling or regulatory breaches – which have not been settled by a firm’s internal complaints process – is decided.

Updates will include adding a new registration stage to complaints submissions to ensure all referrals are ready to be investigated by a caseworker, new powers to dismiss complaints that are better resolved in court and clarifications to the “fair and reasonable” test the FOS applies to complaints.

The redress reforms come amid a wider set of proposed changes to the ombudsman, which the government said were designed to “stop the FOS acting as a quasi-regulator and ensure that the FOS is delivering its role as a simple, impartial dispute resolution service”.

According to Sarah Pritchard, deputy chief executive at the FCA, requirements were laid out for a “system that delivers fair compensation fast, while providing greater certainty to businesses so they have the confidence to invest, grow and compete”.

Modern service

James Dipple-Johnstone, interim chief ombudsman at the FOS, said: “The financial sector has changed significantly since the FOS was set up 25 years ago, which is why we are driving forward changes to transform the redress system.

“We are laying the foundations for an agile, responsive and modern service which is fit for the future and has the confidence of consumers and firms alike.

“Building on improvements we have delivered already, these new measures will further modernise our operations to ensure we remain a service which keeps pace with a changing sector in delivering our vital service for consumers and supporting confidence in UK financial services.”

According to Phil Smith, head of redress at financial services consultancy Broadstone, the ”government’s response marks an important step towards bringing greater clarity and consistency to the UK’s redress framework”.

He continued: ”Ensuring that the FOS places greater weight on firms’ compliance with FCA rules should provide much needed certainty for firms, while the proposed referral mechanism between the FOS and FCA could help resolve areas of regulatory ambiguity and inconsistency.

“A time limit of 10 years for bringing complaints to the FOS may enable firms to improve future planning and increase investment. The exceptions flexibility is important especially for longer-term financial products where the cause for complaint may take longer to be established, particularly for cases with less financially aware consumers. 

“Greater transparency through thematic reporting and a clearer structure for FOS decision-making should also help firms better understand how complaints will be assessed. Taken together, these reforms aim to strengthen confidence in the redress system by making it more predictable, more transparent and better aligned with the UK’s regulatory framework.”