The Ombudsman – The Consumer’s Champion
While the Financial Standards Authority might have become a familiar name, it is now no more.
As of April 2013 regulation of the financial services industry was divided between the Financial Policy Committee (FPC), Prudential Regulatory Authority (PRA) and Financial Conduct Authority (FCA). The Financial Ombudsman Service (FOS) still exists and carries on in its existing role.
What does this mean for me as a customer?
In practical terms the FPC and PRA will have little direct influence on the experience of those who buy financial products. The FPC monitors the overall health of the financial services sector and regulates it as required, while the PRA monitors the health of major banks and insurance companies and can intercede if it believes that they are acting imprudently. The FCA has responsibility for monitoring the health of organizations which fall outside the PRA’s remit, such as stockbrokers. It also takes ownership of ensuring that all financial services organizations treat their customers responsibly, ethically and fairly. The FOS acts as a mediator between financial institutions and their customers.
What exactly is the difference between the FCA and the FOS?
In short the FCA decides what should happen and the FOS makes sure it does. The FCA looks at how institutions manage customer service and the strategies they use to sell their products. It may take action against any given institution if it believes that there are general failings in some aspect of its behaviour but it leaves individual complaints to the FOS.
The FOS is essentially an adjudication service similar to those run by payment companies such as Visa, MasterCard and PayPal. It is completely free to customers and if it finds in a customer’s favour the institution must comply with its decision. The FOS covers a wide range of financial institutions from the main High Street names and their products to payday lenders and pawnbrokers.
How does it work precisely?
The FOS will only take action in a case if the financial institution in question has failed to resolve a dispute to a customer’s satisfaction. In other words, any complaint should be sent to the institution in question in first instance so that they have an opportunity to investigate and rectify it. They have 8 weeks in which to do so. At that point, if the customer is still left unsatisfied by the institutions, response, they may proceed to the FOS.
Once the customer has set out their complaint, the FOS will need to gather all relevant information in order to come to a fair decision. Depending on the complexity of the complaint this may take anything from a few weeks to several months. The FOS aims to be as quick as possible but also has to be thorough and fair to both parties and many of the complaints it handles require it to understand a complex set of unique circumstances.
PPI complaints are a typical example of this. Once the regulator has all the facts it will take a decision and inform both parties of it in writing. If the FOS finds in the customer’s favour, the institution must comply with the decision.
What happens if my complaint is upheld?
Basically the FOS aims to relieve you of the impact of the institution’s failing so it will award a level of compensation which it feels will achieve this. For example it might order an insurer to uphold a claim or a lender to refund the cost of a mis-sold product. It is highly unusual for the FOS to award compensation for inconvenience and distress and on the rare occasions when it does, awards tend to be below £300 although technically more than £1000 may be awarded.
While the FOS has the authority to require institutions to make payments to customers, only the FCA can levy fines or other penalties on them. The FOS’s role is as arbitrator, regulation is a completely separate matter.
