The power to settle financial complaints.
The power to settle financial complaints.
For printed copies of this or any of our publications, phone 020 7964 0092 or email publications.
ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.
The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.
December 2001
lead cases
When we receive large numbers of cases about exactly the same financial product, we may decide to identify one or more apparently typical cases as "lead cases".
By focusing initially on these lead cases, we can save a lot a duplicated effort for all concerned – and so help to expedite our conclusions. The other cases are "parked" temporarily, pending the outcome of the lead cases.
But some firms have misunderstood this procedure, and the terminology we have used. So we thought we would take this opportunity to clarify some points.
lead case or test case?
We have sometimes described lead cases we are considering as "test cases". But this term can mean a case that is referred to court for a ruling. So, from now on, we will stick to the term "lead cases".
different types of lead case
Lead cases usually arise in one of two ways:
more than one lead case?
It causes delay, rather than saving it, if our investigation of the lead case shows that it does not cover the main features of all the "parked" cases – so that we then have to select and investigate further lead cases.
So before we decide which case or cases to choose as lead cases, we may need to discuss the features of the cases with firms in order to ensure our selection is properly representative. But we – not the firm – will actually select the cases.
This should mean that firms will understand more clearly at the outset what is going on. And that, in turn, should lead to earlier resolution for the customer.
communicating our decisions
Once we have reached a decision on a lead case, we can turn our attention to all the other cases in the same group. We contact whichever party (firm or customer) would lose if we followed the lead case decision in their particular case. We summarise the lead case to them, and ask them to tell us how the circumstances of their case differ from the lead case (if at all).
In the light of what they say, we can decide whether the outcome of their own case should follow the lead case – or whether there are special circumstances that require separate investigation. So, each individual case still ends up being decided on the basis of its own circumstances.
no comment
Sometimes the media speculates. Sometimes one of the parties may comment publicly, perhaps putting their own "spin" on the case. But we do not comment publicly about individual cases – even to set the record straight – as that might draw us into commenting on the details, including sensitive personal and commercial information.
firms’ final response letters who signs them?
The FSA rules define the contents of a firm’s "final response" letter. So these letters are identified by what they say, not by who signs them. It is up to firms to ensure their final response letters are properly issued by the right people.
This marks a change from the practice of the former Banking Ombudsman Scheme and Building Societies Ombudsman Scheme, in that we no longer keep lists of those who are authorised to sign such letters. So firms should stop sending us details of authorised signatories.
what should the letters look like?
While on the subject of final response letters, it seems a good idea to remind everyone of what we prefer to see in them:
Remember – the final response letter should be written in clear, plain language. If possible, it should stand alone. Firms should avoid referring to previous correspondence that may not be readily available to the customer or to us. If firms have to refer to previous correspondence, they should attach a copy.
the new rules: what do they mean for firms?
The main provisions of the Financial Services and Markets Act 2000 came into force from 1 December 2001. So the Financial Ombudsman Service is now resolving complaints against banks and building societies in its own name, rather than in the names of the Banking Ombudsman Scheme and the Building Societies Ombudsman Scheme.
Everyone had been preparing for these changes for a long time and there was much discussion about how things would operate in theory. Now we can see what happens in practice. So how will the new rules actually work, and how do they really differ from what has gone before?
This article summarises the basic framework of the new rules, and identifies some of the most significant changes.
where did the rules come from?
The Financial Services and Markets Act 2000 gave power to:
where are the rules?
The rules are set out in the dispute-resolution (DISP) section of the FSA Handbook. There are five chapters:
The transitional provisions are in the Financial Services and Markets Act 2000 (Transitional Provisions) (Ombudsman Scheme and Complaints Scheme) Order 2001 (SI 2326 – 2001 ). These transitional provisions apply directly; but they are noted as "guidance" in the FSA Handbook.
what types of complaint are there?
The transitional order deals with the following complaints where the firm was a member of a predecessor scheme on 30 November 2001:
That leaves the rules themselves to deal with post-N2 complaints: "deadlocked" complaints about events from 1 December 2001 onwards.
jurisdiction and remedies
Broadly, for relevant existing complaints, we are required to apply:
Broadly, for relevant new complaints, we are required to apply:
This leaves post-N2 complaints to follow the new rules in their entirety.
jurisdiction under the new rules
Jurisdiction issues are narrower than under the rules of the predecessor schemes. They are limited to whether:
firms and activities – compulsory jurisdiction
Firms that were members of a predecessor scheme on 30 November 2001 are covered by our compulsory jurisdiction for events before 1 December 2001. The activities covered are those covered by the predecessor scheme.
Banks and building societies that are regulated by the FSA are covered by our compulsory jurisdiction for events from 1 December 2001 onwards (unless they do not do retail business). The activities covered are:
The relevant activity must have been conducted from an establishment in the UK, so activities in the Channel Islands and the Isle of Man are excluded.
Other firms are likely to come into our compulsory jurisdiction in future years, once they become regulated by the FSA, including:
firms and activities – voluntary jurisdiction
Firms that were members of a predecessor scheme on 30 November 2001 – but which are not regulated by the FSA – are covered by our voluntary jurisdiction (if they join) for events from 1 December 2001 onwards. The activities covered are the same as those covered by the predecessor scheme.
Mortgage lenders that are not currently regulated by the FSA are covered by our voluntary jurisdiction (if they join) for complaints about events before or after 1 December 2001 – but limited to lending money secured by a charge on land, plus any ancillary advice and services.
who can complain?
A complainant must be a customer, a potential customer, or someone who has had other specific dealings with the firm – including:
Any of these complainants can be:
At first glance, this appears to be much like before. But there are a few changes.
is the complaint "in time"?
By now, everyone should be familiar with the new eight-week rule. If a firm has not resolved a complaint within eight weeks of its being raised, the customer can bring the complaint to us – even if the firm has not yet issued a final response letter (which banks used to call a "deadlock" letter).
If the firm has issued a final response letter, ordinarily the complaint must be brought to us within six months. The final response letter is required to quote this time limit.
The complaint should also be brought to us no more than six years after the event complained about. But, even if the event happened more than six years ago, the complaint can still be brought to us if the complainant could only have discovered within the last three years that there were grounds for complaint.
On the last point, note that what matters now is when the complainant knew there were grounds for complaint – not when the complainant knew of the event.
early termination
Other issues that the predecessor schemes treated as matters of jurisdiction are treated by the new rules as matters of procedure. In particular, there are various procedural grounds on which we can dismiss a complaint without considering its merits (we call this "early termination").
Paragraph 3.3 of the rules lists 17 grounds on which we may decide not to consider the complaint. The grounds include:
This is a major area of change. We may decide not to consider the complaint on one of these grounds. But that does not prevent our considering the complaint if we think we should, even if it is one the predecessor schemes could not have considered. So if we thought it appropriate, we could look into a complaint about – for example – a lending decision or the setting of interest rates.
evidence
In effect, the new rules say that we decide what evidence should be submitted to us, and how it should be presented. Our statutory right to demand information overrides any duty of confidentiality that the firm has.
The new rules allow us to accept evidence in confidence. But – and this is an important point – we decide what should and should not be kept confidential. Firms can ask us to treat items as confidential but we do not have to agree – though we are likely to do so where, for example, confidential information about a third party or security matters is involved.
any questions?
As we said at the outset, this article outlines the basic framework of the
new rules, and highlights some important differences between the old and
the new. But it is not a comprehensive explanation. By answering some
questions, it may raise others.
Remember that advice on our rules and procedures is available from our
technical advice desk:
email technical.advice@financial-ombudsman.org.uk
phone 020 7964 1400.
But remember also that it is the FSA you should contact for advice on the chapter 1 rules about in-house complaint-handling and reporting to the FSA.