Re-dressing redress: the FCA and FOS joint Call for Input

The Financial Conduct Authority (FCA) and Financial Ombudsman Service (FOS) have published a joint Call for Input (CFI) on reforming the consumer redress framework. The CFI is focused on possible changes to the framework that applies when large numbers of complaints about the same issue arise (‘mass redress events’). In the FCA and FOS’s view, the existing framework works well for individual complaints about specific issues.

Mass redress challenges

The FCA identifies various issues to be addressed. Key amongst these:

• Unexpected increases in complaints create operational difficulties for firms and the FOS. This creates uncertainty for firms and their stakeholders and may impact innovation and investment. In the worst cases this uncertainty may lead to firm failures. If firms can’t deal with their caseload within the set time limits, FOS referrals may occur, causing further delays. 
• Inconsistent interpretations of FCA rules may precipitate a mass redress event, uncertainty for firms or inconsistent outcomes for consumers. Outcomes-focused regulation in particular (such as the Consumer Duty) requires greater focus on consistently interpreting regulatory requirements.
• The role of personal representatives and claims management companies. The CFI notes that some mass redress events have been precipitated by these firms, and that some of the complaints they raise are not properly evidenced or substantiated, creating unnecessary work for firms and the FOS. 

Give your input

The CFI raises several questions, including:

• Whether a ‘mass redress event’ should be defined and, if so, how? This may enable them to be identified and managed before they become systemic issues.
• Short- or medium-term ways to reduce FOS referrals. For example:
  • Could firms be given further guidance to help them identify and proactively address harm? The FCA has observed that firms taking proactive remedial steps (e.g. through a past business review) and communicating well with customers will receive fewer complaints before remediation occurs. 
  • Is the current deadline for firms to resolve complaints – before a FOS referral – long enough? Specifically, does it give firms adequate opportunity to resolve complaints themselves.
  • Should there be more controls around which complaints may be escalated for a final Ombudsman decision?
  • Should the grounds for dismissal of a complaint be widened?
  • Should the time limits for making FOS referrals be adjusted? 
• Proposals for long-term change: 
  • The CFI considers at length how the FCA and FOS can improve co-operation (and engage with stakeholders) on matters with wider implications. For example, whether they should consult with each other more often or make their views known publicly, and whether the FOS should have the ability to pause relevant time limits until the FCA gives its view on interpretation of relevant rules. 
  • The CFI also questions whether there should be specific rules for mass redress events, to enable the FCA to pause complaints handling requirements in certain circumstances. This would allow the FCA to conduct diagnostic work to assess the harm and consider the best approach to resolve the issue. 
• Complaints assessment criteria: The FCA and FOS have requested input on whether there are additional or different considerations the FOS should consider when undertaking the ‘fair and reasonable’ assessment. 

Timing

The CFI closes on 30 January 2025. The FCA and FOS intends to publish a document summarising responses received to the CFI and next steps in H1 2025. This will include proposed short-/medium-/long-term changes to the redress framework for the FCA and FOS to consider further.