the changes in complaints-handling procedures

On 1 December 2001, when the Financial Services and Markets Act 2000 came into force, the Financial Ombudsman Service acquired the formal powers to deal with disputes that were formerly handled by the Office of the Investment Ombudsman, the Personal Investment Authority Ombudsman Bureau and the Securities and Futures Authority Complaints Bureau.

We have received a number of queries about the new complaints-handling procedures, especially from firms that were previously regulated by Securities and Futures Authority (SFA), which are finding that the new regime has brought significant changes.

Here, we set out the answers to some of the questions we are most commonly asked.

firms’ internal complaints-handling procedures

The rules under which we operate require firms to have their own internal complaints-handling process and to make this available to customers. Generally speaking, firms have to give the customer a final response within eight weeks of receiving the complaint.

what is meant by a ‘final response’?
The final response should set out a firm’s final view on the issues raised in the complaint and tell the customer about the right to refer the dispute to the Financial Ombudsman Service within six months, if they remain unhappy with the outcome.

It is helpful if firms also include in their final response:

• an expression of regret or apology
• a summary of the complaint
• a summary of the outcome of the firm’s investigation
• whether the firm acknowledges that it has been at fault in some way
• details of any offer a firm is making to settle the complaint
• how long the offer will remain open
• if appropriate, why the firm considers the complaint is outside our rules – but explaining that it is for us, not the firm, to decide this.

what happens if the customer complains first to the Financial Ombudsman Service?
If we conclude that the firm has not had an adequate opportunity to respond to the customer’s complaint, we will write to it, setting out the concerns the customer has raised with us. We will ask the firm to resolve the matter, and we will let the customer know that we have done this.

when does the eight-week period start?
The eight-week period starts from the date the customer first makes clear to the firm that he or she has a complaint. If we, rather than the customer, are the first to notify the firm of the complaint, then the eight-week period starts when we pass on the customer’s complaint to the firm.

what happens if the firm can’t resolve the complaint within eight weeks?
There will, of course, sometimes be situations where, for good reason, firms may need extra time. This may happen – for example – if the customer has significantly delayed providing information that is vital to the firm’s consideration of the complaint. In many cases, so long as customers are kept informed of progress and understand the reasons for any delay, they will agree to allow the firm additional time to produce its decision letter.

We ask firms to let us know as soon as possible if they wish to have extra time to resolve the complaint. Such requests should, however, only be made in exceptional circumstances. We will consider the situation and, if appropriate, may recommend that the customer allows the firm extra time before we start our formal investigation. Our correspondence will make clear what stage the case has reached.

initial contact

If a firm has already sent the customer its final response, or the eight-week period has already expired by the time the customer contacts us, then we will notify the firm that we have received the complaint and, subject to jurisdiction checks where necessary, will convert the complaint to a ‘case’ and ask for the firm’s file papers.

what do we mean by ‘file papers’?
These are copies of any documents, or recordings of any telephone calls, that concern the customer and may be relevant to our investigation, or on which the firm may wish to rely, in connection with the complaint.

We generally settle complaints based on the paperwork that the firm and the customer send us at this stage in the process. So it is important that firms respond promptly and carefully to our request for the ‘file papers’, and that they set out clearly their view of the complaint, explaining why they believe that we should not decide in the customer’s favour.

must firms use recorded delivery when forwarding file papers?
We suggest that firms do this, particularly if they are sending us original or sensitive information. However, this is a matter for firms to decide.

will the information that firms provide be treated as confidential?
We will have regard for rights of privacy when we handle information that firms provide. But – in general – firms should assume that we may disclose to the customer any information sent to us about the complaint. If a firm believes that some information should be kept confidential between us, it should mark the information clearly and tell us why it does not think we should pass it on to the customer. We will consider such requests – but we may not agree to them, unless there is a strong case for confidentiality, such as security reasons.

can firms initiate legal proceedings against the customer once the complaint has been referred to us?
While a complaint is with the ombudsman service, we do not expect firms to take any legal action against the customer in relation to the dispute. Firms should tell us about any action they may be proposing.

can firms continue to deal with the customer once the complaint has been referred to us?
While we are considering a complaint, firms should continue to deal with the customer as normal – for example, executing dealing orders. But obviously, if firms do anything that is relevant to the complaint, they should inform us.

investigation of complaints

will the Financial Ombudsman Service try to resolve complaints by conciliation?
Our aim is to resolve the complaint as quickly as possible. If the complaint involves an issue that we deal with frequently, then we can usually tell the firm and the customer at an early stage what the outcome is likely to be. If we consider that the firm has treated the customer fairly, we will say so.

If we cannot resolve the matter in this way, we will begin a full investigation of the complaint. At this stage there may still be an opportunity to resolve matters through conciliation. But if not, then once we have finished our investigation, we will contact the firm and the customer to set out how the complaint should be resolved.

are the views of the Financial Ombudsman Service binding on firms at this stage?
The views we express during conciliation and investigation are not legally binding on firms. But they reflect the view an ombudsman would be likely to take, if the complaint went to an ombudsman for a final decision.

how long will this take?
Most complaints are resolved within six months. But a few can take longer, particularly if we need to make further enquiries.

ombudsman’s decisions

We envisage that, in most cases, both parties will accept the adjudicator’s conclusions. However, both the firm and the customer have the right to ask for those conclusions to be referred to an ombudsman. The ombudsman will review the papers and issue a final decision.

how does the ombudsman reach a decision?
The ombudsman will decide what is fair and reasonable in the circumstances of each individual complaint. In doing so, the ombudsman takes into account the law, industry standards and codes and – where appropriate – what the ombudsman considers to be good industry practice at the relevant time.

will firms have to attend a hearing?
Our process is not like going to court. We can get to the bottom of most complaints by writing to or phoning the people involved. We do not hold hearings with sworn witnesses, cross-examination and formal submissions.

Occasionally, we may decide that bringing all the parties together at an informal hearing could help us to resolve a complaint. A firm can also write to us requesting a hearing, if it believes that this might help settle matters. We may decline to hold a hearing if we do not think one is necessary.

what sort of awards may the ombudsman make?
The maximum money award we can make is £100,000, although if we consider that an amount more than the maximum is required, as fair compensation, then we may recommend that the firm pays the balance. The limit on the maximum money award has no bearing on any steps an ombudsman may require a firm to take (regardless of whether a court could order the firm to take those steps).

If the decision is in the customer’s favour, then the ombudsman can, exceptionally, also award any legal or professional costs the customer has incurred. For the purposes of calculating the monetary limit of any award,

and finally…

who should firms contact if they still have questions?
For queries about the ombudsman’s practice and procedures, please phone our technical advice desk on 020 7964 1400.

To discuss any general issues concerning your firm’s relationship with the ombudsman service, contact our liaison manager, Caroline Wells, who will also be happy to assist with liaison visits and training.

Contact Caroline by email or phone 020 7964 0648.