The Financial Ombudsman Service has acted as “a quasi-regulator,” says the Treasury, and has set out a brand new path for the disputes physique, which can see it defer to the Financial Conduct Authority.
The session report, ready by Economic Secretary to the Treasury Emma Reynolds (pictured), says within the 25 years since FoS was fashioned it has, at occasions, overlapped with the bigger FCA, which has produced confusion for corporations and inconsistent rulings for shoppers.
Reynolds mentioned: “There shouldn’t be all the time coherence between the regulatory method set by the FCA because the monetary conduct regulator and the method utilized by the FOS to settle complaints between shoppers and corporations.”
She added: “This potential for rigidity can, in a small however impactful quantity of instances, outcome within the FOS appearing as a quasi-regulator.
“This can go away corporations working inside an unsure regulatory setting, with damaging penalties for the power of corporations to speculate, innovate and develop, and might result in unpredictable outcomes for shoppers.”
Reynolds, who started her report in March, added that corporations “highlighted the potential for pressure on the redress system when FoS is required to deal with instances that are associated to a mass redress occasion”.
FoS dealt with hundreds of thousands of long-running cost safety insurance coverage compensation claims, with regulators doubtlessly going through claims from hundreds of thousands of motorists in the event that they have been mis-sold finance agreements when shopping for a automotive, after a Court of Appeal ruling final October.
Firms have additionally complained that FoS has accomplished little to fight the tide of claims administration firms which have grown up round finance corporations for the reason that starting of the cost safety insurance coverage scandal within the Nineties.
Reynolds says the federal government will use adjustments to laws, when parliamentary time permits, to make a collection of reforms, together with:
FOS can be required to seek out {that a} agency’s conduct is “truthful and cheap” the place it has complied with related FCA guidelines
A brand new framework on how FOS and the FCA work collectively – the place there may be ambiguity in how the FCA’s guidelines apply, the FOS can be required to hunt a view from the FCA and the FCA can be obliged to reply
A ten-year time restrict for complaints delivered to the FOS
The FCA will play a better role in mass compensation instances, typically referred to as mass redress occasions. FOS can be “obliged to refer potential wider implications points or mass redress occasions to the FCA, and the FCA can be obliged to think about these points”
Industry welcomed clearer roles between the FCA and FoS.
Broadstone senior advisor Simon Robinson says: “The evaluation of the Financial Ombudsman Service is aiming to create a extra coherent framework between it and the FCA.
“There is a specific deal with mass redress occasions, which is well timed given the upcoming Supreme Court ruling on motor finance.
“The hoped-for consequence seems to be the creation of a extra versatile method that may react with agility and velocity with better involvement from the FCA to create constant and speedy outcomes.”
Earlier this month, UK Finance additionally labelled FoS a “quasi-regulator” and insisted that the federal government publish a timetable of reform for the physique.
The Treasury report, Review of the Financial Ombudsman Service, is open for session for 12 weeks till 8 October.
