The FCA and FOS set out proposals on modernising the redress system, including developing a definition of potential mass redress events, strengthening reporting requirements on firms, introducing a ‘lead complaints’ process to address ‘novel and significant complaint issues’ and creating a new registration stage for complaints referred to FOS.
We broadly support the proposed mass redress definition and reporting requirements and provide feedback on wording. We note, however, that it is unlikely the new rules will always close the gap between the FCA’s (or FOS’s) and industry understanding sufficiently to prevent all drivers of mass redress. A proactive approach from the regulator regardless of firms’ reporting is essential to identify potential issues at an early stage and challenge firms. Here we are less clear what the FCA plans to do to prevent the problems driving mass redress recurring in future.
We highlight opportunities for the FCA to identify at an earlier stage where there is a gap between its own and industry understanding of the appropriate application of regulation and taking action to close the gap through clarification of rules and guidance, enforcement or other steps, and to establish a facilitated mechanism for consumer organisations and others to share insight to identify emerging redress issues.
We support the good handling of novel and significant complaint issues to deliver better outcomes for consumers and an efficient approach for firms. It is unclear to us, however, why FOS and the FCA are proposing a new lead complaints process triggered by firms rather than FOS. We also see risks with the proposal that the consultation does not address, such as undermining FOS’s credibility as an impartial and independent adjudicator and dampening its ability and appetite to make decisions independently and impartially. We highlight the safeguards we would expect to see to protect consumer interests before any lead complaints process is taken forward.
We agree with the potential benefits of a registration stage for complaints referred to FOS but note it is imperative that any registration stage is developed and piloted to ensure it works well for consumers, including those who face additional barriers to making complaints and accessing FOS.
Finally, we highlight we are disappointed so little focus has fallen in the work of FOS, the FCA and HM Treasury following the initial call for evidence on supporting consumers. StepChange advisers hear every day from advice clients who have experienced poor conduct by firms but face a number of barriers to raise concerns with firms, including the health problems associated with financial difficulty.
At present there is little support for consumers to raise complaints in contrast, for example, to support for consumers who have poor experiences in the energy market who can access advice and support from several funded sources. Free to client support for people who need help to complain would be an important step forward to address the significant imbalance in power between firms and consumers who experience poor conduct.