Financial Ombudsman Service’s 2022/23 Plans and Budget Consultation - Which? response

Summary

• Which? welcomes the Financial Ombudsman Service’s consultation on its plans and budget for 2022/23. The Ombudsman plays a vital role in the financial services industry, providing redress for consumers and working with industry and regulators to prevent consumer detriment from arising. The upward trend in the volumes of complaints to the FOS supports the need for further investment in the service.
• We support the Ombudsman’s priorities to enhance its service, prevent complaints and unfairness from arising, and build on its capabilities. We are particularly supportive of the FOS’ preventative work, including the sharing of insight on consumer issues and the causes of complaints. Which? recommends that the Ombudsman should regularly publish comparative, firm-by-firm data on more detailed and relevant areas including authorised push payment (APP) scams.
• The FOS should ensure that offers made in proactively settled complaints are fair to consumers. We appreciate the urgency at which the FOS is working to address the backlog of complaints. For the most part, the backlog is the result of wider trends and poor firm practices. Under the FOS’ temporary changes to reporting the outcomes of proactively settled complaints, the FOS should continue to deliver on its commitment to review the fairness and reasonableness of any proactive offer made by firms.
• We continue to support a budget that provides a free, high-quality service and fair outcomes for consumers. The funding system should ensure that the FOS can invest in its key priorities and provide strong incentives for financial services firms to get things right the first time.
• We expect significant levels of financial disputes between consumers and firms in the areas of scams and general banking provision, and a growing number of complaints in buy now, pay later (BNPL).
  • The growing complexity of scams is leading to widespread consumer harm, while the inconsistent implementation of the Contingent Reimbursement Model (CRM) Code by firms is likely to lead to more APP scam victims challenging banks' decisions on reimbursement.
  • As a result of a reduction in the availability of bank branches and free-to-use ATMs, we expect to see a significant rise in the number of complaints made to the FOS from consumers being underserved by banks or facing financial exclusion.
  • We are concerned that the risks associated with the way that BNPL products are currently being used by consumers could persist even once the sector becomes regulated, resulting in a considerable number of complaints to the FOS once the sector falls under its jurisdiction.
• The FOS should consider the impact of cost of living challenges on levels of demand for its service. We are concerned that current cost of living challenges will put substantial pressure on people’s finances, driving greater use of credit, increasing debt levels, and leaving consumers vulnerable to fraud. We anticipate a rise in complaints to the FOS as a result, including a rise in people in more vulnerable circumstances seeking redress and support.
• We expect to see the Financial Conduct Authority’s (FCA) New Consumer Duty (NCD) influence FOS caseloads. With effective implementation and supervision, the proposed Duty could prompt firms to devote more attention to delivering good consumer outcomes and, in so doing, reduce the volume of complaints made to the Ombudsman. However, immediately following implementation of the Duty, there may be a rise in complaints to the FOS as consumers and firms adapt to the new rules.