The Government has decided to proceed with its plans to modernise the redress system, and the FCA and FOS are now consulting on plans.
HM Treasury has published the outcome of its review, in which it confirms it will legislate for:
- adapting the “fair and reasonable” test that the FOS uses to determine cases, so that it confirms that where firms have met their obligations under FCA rules, they must be found to have acted fairly and reasonably by the FOS;
- a new referral mechanism between the FOS and the FCA so that the FOS has to seek the FCA’s views if there is any uncertainty on how relevant rules should be interpreted or if the issue raised may have wider implications for the industry;
- a new 10 year absolute time limit for complaining to FOS (although the FCA would have power to make exceptions);
- structural changes to the FOS to provide greater consistency in decision making;
- a new requirement for FOS and FCA to publish thematic reports giving examples of how the FOS will consider certain types of complaint; and
- ensuring the FCA has the tools to respond when required to mass redress events.
The FCA has published:
- finalised guidance on identifying harm, including good and poor practice guidance, so that firms can better understand how they can identify and proactively rectify redress issues;
- finalised guidance on when firms should report emerging issues under SUP15; and
- changes that will lead to improved efficiency for the FOS and the FSCS.
The FOS’s part of the proposals – on which it asks for comment by 11 May – relate to:
- amending the factors it considers as part of the “fair and reasonable” test, so as to delete the current provision that it must take into account good industry practice at the time;
- introducing a registration phase for complaints, which will ensure that only evidenced complaints progress through its process. The FOS proposes a 2 stage process, involving a pre-registration stage for early assessment and information gathering, which will require complainants to respond within fixed timescales, and a registration stage where full investigation begins; and
- amending the grounds for dismissal of a complaint, including providing more detail on when the FOS should be able to dismiss complaints where complainants have acted vexatiously, abusively or otherwise unreasonably, and reintroducing the right to dismiss where the respondent firm has already reviewed the matter in accordance with relevant regulatory standards and guidance.
These changes can progress before the legislative changes take effect.