One of these changes is revising how the redress system operates for consumers, businesses, the FCA, and the FOS. Here, we review the current Call for Input, issued jointly by the FCA and the FOS, and what they want to achieve for the future.
Current Challenges in Redress
The primary concern and purpose of this industry review is to examine how the whole system manages mass redress events, where an issue is widespread across the industry and where multiple claims for the same complaint come from thousands of consumers as well as professional representatives such as legal firms or claims management companies.
When this happens, as we have seen historically with PPI and more recently with motor finance commissions, it puts huge strain on the businesses involved from financial, legal, and operational perspectives. Often these claims can go back many years, meaning that the administrative challenge is significant, notwithstanding calculation and payment of any recompense to the customer. It also further erodes the trust between financial institutions and their customers when there is no clarity of process and outcomes are delayed.
This leads to increased escalations to the FOS which can result in further delays to customer outcomes, as well as increase the financial and administrative cost to the business.
Objectives of the Call for Input
The Call for Input sets out the following objectives of the FCA and FOS:
- "Consumers can get appropriate redress efficiently when things have gone wrong.
- Firms identify harm at an early stage, proactively address it and resolve complaints more effectively themselves. This will reduce the need for consumers to refer complaints to the Financial Ombudsman to get a fair outcome and may also reduce case fees for firms.
- We can work with stakeholders to identify redress events or issues with wider implications earlier so they can be resolved swiftly and efficiently. We anticipate this may result in fewer events escalating into mass redress events, a reduced burden on the Financial Ombudsman and the Financial Services Compensation Scheme (FSCS) and a potential reduction in the long term of associated levies.
- Consumer and industry stakeholders have more direct channels of communication with the FCA, the Financial Ombudsman and other regulatory partners involved in the Wider Implications Framework (WIF). This will make it easier and quicker for consumer and industry stakeholders to flag matters with potentially wider implications for a market.
- We improve how the FCA and the Financial Ombudsman work together to ensure our views on regulatory requirements are consistent. This will provide a more predictable regulatory environment for firms which helps to support investment and further the FCA’s secondary objective to facilitate the international competitiveness of the UK economy in the medium to long term."
All stakeholders, including financial services firms, consumers and consumer champions, legal firms, claims management companies, industry bodies and experts, and suppliers to the FS sector are invited to contribute their views here.
The Importance of Effective Redress Handling
Confusion and inefficiency in financial services complaints and redress handling can undermine the whole sector and the relationship they have with their customers. The financial burden of retrospective mass redress events can be substantial and, in the case of SME firms, potentially devastating. In particular, the FCA highlights its objectives of consumer protection, market integrity and competitiveness as key reasons to review the current guidelines and ensure we have a process and framework that serves all stakeholders.
With the Dispute Resolution Complaints guidance last being reviewed in 2014, the time is right for a revision that reflects the needs of the current complaints landscape. The introduction of the Consumer Duty and the shifting mindset towards a more outcomes-based approach to resolving customer complaints have been just two of the major changes to the sector since the guidance was written. This is combined with the growth of claims management firms and increased interest from legal firms in taking forward test cases through the courts.
What is agreed is that is it important to have a healthy, effective, and competitive financial services sector. This provides the best value and service for end consumers and offers the growth opportunities that the Chancellor wants to see for the wider UK economy.
Working with financial services firms to handle their complaints for over 20 years, EQ has seen the substantial changes the industry has made to provide the best possible service for their customers. It is now widely recognised that the data and intelligence that solutions like ours can provide form a vital link in the objective of all businesses to continually improve, and to identify issues at an early stage before they become major problems.