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Financial Services and
Markets Act 2000
March 2001
The Transition to the New Ombudsman Scheme and the Investigation
of Complaints against the Financial Services Authority- A Consultation
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PART
II - RELEVANT COMPLAINTS
2.1
The Order applies only to “relevant complaints” -
that is, those complaints that relate to acts or omissions occurring
before N2 and which could have been dealt with under a former scheme.
The order does not in any way affect the treatment of complaints relating
to acts or omissions occurring after N2. Nor does it affect complaints
relating to bodies or persons that were not subject to any of the
former schemes.
What
is a relevant complaint?
2.2
The order sets out what constitutes a “relevant complaint”
for the purposes of the scheme. Relevant complaints fall into two
categories:
-
"relevant
existing complaints” that were made before N2 to one
of the former schemes but which had not been resolved at N2; and
-
“relevant
new complaints” made after N2 but which relate to an
act or omission occurring before N2 in respect of which a firm
was subject to a former scheme immediately before commencement.
2.3
The order does not set out in detail which complaints will fall into
each of these categories. That will depend on whether the complaint
could have been dealt with under the former scheme in question, which
will in turn depend on the detailed terms of that scheme.
2.4 Relevant
existing complaints will, subject to the provisions in the Order,
after commencement be dealt with under the new scheme. This ensures
that all existing complaints being handled by the former schemes at
commencement will be resolved.
2.5 Relevant
new complaints will be dealt with under the new scheme. Such complaints
can be brought provided that the act or omission complained of was
that of a person subject to a former scheme and the act or omission
occurred in the carrying on of an activity to which the former scheme
applied. In order to bring a complaint the complainant must meet
the eligibility criteria of the new scheme rather than those of the
former scheme. It is our understanding that the eligibility criteria
of the new scheme are generally more generous than those of the former
schemes, so this should not, therefore, disadvantage complainants.
As an additional safeguard article 3(3) allows FOS to treat any complainants
ineligible under the new scheme as eligible if they would have been
eligible under the rules of the relevant former scheme. We recognise
that this greater eligibility may potentially result in firms being
subject, post-N2, to complaints relating to pre-N2 business which
could not have been taken to an ombudsman under the rules of the relevant
former scheme – the most significant example is the ability of
small businesses under the new scheme to take complaints relating
to insurance to the ombudsman. We do not believe that the effects
of these changes will be significant. However, we are interested
in views on this issue.
2.6 Question
1 – Our preference regarding eligibility for bringing relevant
new complaints is for the approach set out in article 3(3) of the
Order. However, we would be grateful for the views of respondents
on any exceptions or other safeguards which they believe necessary
to ensure fairness for all parties.
2.7 Consultees
will wish to note that the effect of the conditions set out in article
3(2) is that all complaints which could have been dealt with
under a former scheme immediately before N2 are to be classed as relevant
new complaints (this will include complaints made against firms which
do not become FSA authorised at N2). This means that a firm which
belongs to a former scheme immediately before N2 will be unable later
to decide to “opt out” of having its relevant complaints
dealt with by the FOS in accordance with the Order. This is different
to the way the former schemes work at the moment, because the rules
of those schemes generally apply only to firms which are members of
the scheme at the time the complaint is made (although the rules of
some of the schemes do require member firms to make a limited ongoing
commitment in relation to complaints received after they have left
the scheme).
2.8 Because
it is proposed that all the former schemes are to cease to operate
at N2, we do not think it would be practicable to maintain the link
that currently exists between membership of those schemes and the
scope of the ombudsman’s jurisdiction to deal with relevant complaints.
By looking instead to whether a complaint could have been dealt with
under a former scheme immediately before N2, the Order should
ensure that consumers do not lose their access to a dispute-resolution
service as a result of the transition to the new scheme.
2.9 We
recognise that this approach would remove the flexibility that many
firms currently enjoy, at least in theory, to leave one of the existing
schemes should they wish to do so. In practice, that flexibility
will often be limited either because membership of a scheme is a condition
of authorisation, as for firms regulated by the Self Regulating Organisations
(“the SROs”) and for Building Societies, or because
membership has become accepted best practice across the industry.
Nevertheless, if respondents felt strongly that such rights to opt
out as currently exist ought to be preserved, then an alternative
approach might be to allow firms similar flexibility to opt out of
the new scheme as it applies to relevant complaints as they currently
have to opt out of the former schemes. However, even in these cases
“relevant existing complaints” would have to be completed.
For a firm belonging to a former scheme that is voluntary (such as
the Banking Ombudsman or the Insurance Ombudsman Bureau) this would
enable it to refuse to allow the FOS to deal with relevant new complaints
after N2. Where membership of a scheme is required as a condition
of authorisation, only those firms that did not become or ceased to
be authorised under FSMA would be allowed to opt out.
2.10
Our view is that such an opt out would be problematic. It is
not consistent with the way Part XVI of FSMA is designed to work,
which is based on the circumstances at the time the act or omission
took place not those at the time the complaint is made. It would
also enable firms to “badge” themselves as belonging to
the new ombudsman scheme without being required to allow the ombudsman
to consider relevant complaints made against them. This is not currently
possible under the rules of the existing schemes and we think it could
mislead consumers and that it would be unfair to those firms that
did not seek to take advantage of any opt out.
2.11
Question 2 - while our preference is for the
approach currently taken in article 3(2) of the Order, we would be
interested in views on whether any firms would want some flexibility
to “opt out” from the new scheme along the lines outlined
in paragraph 2.9 above.
Time limits for
making a relevant complaint
2.12
Although the general effect of articles 2 and 3 is that the eligibility
of a relevant complaint will depend on whether it could have been
dealt with by a former ombudsman, this principle will not apply
where any requirement in the former scheme rules for a complaint to
be made within a given time limit is concerned. Instead, the new
time limits imposed by the FSA under paragraph 13 of Schedule 17 to
FSMA will apply. This is the effect of article 4 of the Order.
2.13
We feel this is important if the new scheme is to be straightforward
for both consumers and firms to understand. The switch to the new
time limits may sometimes mean that a relevant complaint that would
otherwise have been out of time will qualify under the Order for consideration
by an ombudsman, and we acknowledge that this means the Order has
a marginally wider scope than the rules of some of the former schemes
would strictly suggest. However, we feel that this change at the
margins is justified by the advantages of moving to a single set of
time limits at the earliest opportunity.
2.14
If the Order did not allow the time limits to be aligned in this
way, it would mean consumers and firms having to work out first whether
or not the complaint relates to an event occurring before N2. If
so, they will then need to decide which former scheme would have been
able to deal with the complaint - not a straightforward task at a
time when those former schemes have ceased to exist - and what time
limits were applicable under that scheme before they could know how
long was available to them to make their complaint to the FOS. We
think this has the potential to be extremely confusing for consumers
and firms and that it could hinder efforts by the FOS and firms to
issue clear and intelligible communications about the rights consumers
have and the steps they need to take should they wish to make a complaint.
2.15
Of course, it is possible that in some cases, the switch to the
new time limits may actually reduce the amount of time a consumer
has to make a complaint. We do not think that would be acceptable.
Article 4(2) therefore provides that, where the new time limit is
shorter than the time limit that would have applied under the old
scheme, then for the first 12 months after N2 the old time limit will
continue to apply. This is designed to ensure that complainants are
not caught out by the transition to the new regime while allowing
for the full rationalisation of all time limits within a reasonable
time frame.
2.16
Question 3 - comments on the proposed provisions
to allow for the rationalisation of time limits are invited. In particular,
do respondents feel that the marginal adjustments to the scope of
the former schemes that may occur as a consequence of aligning time
limits are justified by the gains in terms of the simplicity of the
scheme from the perspective of both consumers and firms?
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