Joint FCA and FOS consultation on Modernising the Redress System (CP 26/9) - Which? response

We continue to support the broad objectives of the Financial Ombudsman Service (FOS) and the Financial Conduct Authority (FCA) to improve the efficiency and effectiveness of the FOS in providing simple, impartial and timely redress to consumers when things go wrong. Efforts to date, including the greater and more transparent collaboration between the two organisations, as set out in their Memorandum of Understanding, have been positive first steps.
However, we are not convinced that all elements of the proposals in this consultation paper will support the achievement of this goal. Instead they may make it harder for consumers, particularly vulnerable consumers, to engage effectively with the FOS. As a result, we see a risk that some of these proposed changes could lead to unintended outcomes for the FOS, such as an increased reliance on consumer representatives such as Claims Management Companies (CMCs).
We also have concerns that some of the proposals seem to presume broader legislative changes that we do not support and which have not yet been confirmed or subjected to parliamentary scrutiny. In bypassing proper procedure, the proposals risk undermining the existing jurisdiction of the FOS set out in primary legislation.
Our feedback on the specific proposals set out in this paper are:
- Registration stage: We support, in principle, a registration stage as a way to streamline how the FOS initially engages with complaints. However, the proposed design of this stage may be more likely to act as a barrier to access for consumers than a way to ensure complaints are sufficiently ready for investigation. We ask the FOS to improve and test the design of this 1 stage to ensure it functions as a genuine efficiency mechanism rather than being an added hurdle for consumers.
- Dismissal grounds: We believe the existing dismissal grounds already provide an appropriate threshold for dismissal that balances maintaining operational efficiency with ensuring consumers have fair access to redress. We are particularly concerned that some of the proposed dismissal grounds allow too much discretion in their wording and could result in consumers being blocked from accessing the FOS despite having valid complaints. We ask the FOS to maintain the current dismissal grounds.
- Other ADR changes: We are concerned these proposals may affect a consumer’s right to a fair hearing. In particular, the requirement to obtain claimant consent before transferring a case to another ADR scheme or to court as a test case, where the complaint is within the FOS’s jurisdiction, is a key consumer safeguard and must be maintained. In addition, the current ability of the FOS to treat a case as withdrawn is sufficient for cases where consumers are not engaging with FOS timelines and increasing this to a ground for dismissal, which would permanently prevent a consumer from having the complaint heard by the FOS, is unnecessary. We ask the FOS to reconsider these proposals.
- Fair and reasonable test: We support the FOS’s ambition to give clarity to firms as to how they will apply their fair and reasonable discretion. However, the proposed changes rely on and try to align with an ‘emerging legislative direction’ that we do not support and which has not yet been codified. We insist that the FOS must not seek to alter these underlying DISP rules until any potential legislative changes are settled as currently these changes would undermine the existing statutory framework.

Download our full response here

pdf (295 KB)

There is a file available for download. (pdf — 295 KB). This file is available for download at .

FCA and FOS second consultation on Modernising the Redress System - Which? response