The Financial Conduct Authority and Financial Ombudsman Service plans to modernise the financial redress system to avoid it becoming overwhelmed.
Currently, the majority of complaints are resolved by firms, but the FCA said that high volumes of complaints on specific or novel issues can jam the system, causing significant delays to consumer compensation.
The changes will help firms identify and resolve issues before complaints escalate, the regulator said. This would provide greater predictability, so businesses have the confidence to invest, innovate and support UK growth.
Proposals include improving how the FCA and Financial Ombudsman work together to ensure consistency in the interpretation of regulations. This involves a new referral process to improve transparency about regulatory alignment and a lead complaint process to look at novel and significant complaint issues as they emerge.
There would also be clearer guidance for firms on reporting issues to the FCA sooner, alongside good practice examples to help identify and resolve complaints, as well as guidelines to help industry assess and trigger the need to resolve a situation with wider implications that could spike complaints.
Lastly, the FCA proposes making changes to the way the Financial Ombudsman processes complaints to ensure they are well-evidenced and ready before an investigation begins.
Sarah Pritchard, deputy chief executive at the FCA, said: “When something goes wrong, it is right that people are compensated. But a lack of certainty in the financial redress system can hold back investment and innovation. Our changes will help create a system that is more predictable for firms and gives consumers quick and fair compensation where they’re owed it, supporting UK growth.”
James Dipple-Johnstone, interim chief ombudsman at the Financial Ombudsman Service, added: “These reforms mark a significant step in modernising the UK’s redress system, making it more agile and responsive and a much better fit for today’s economy. Our changes will bring consistency and predictability for businesses and consumers, enabling us to better focus on our core purpose – resolving individual disputes quickly and with minimum formality.”
Separately, the FCA and Prudential Regulation Authority have proposed changes to streamline the Senior Manager Certification Regime (SM&CR) in a bid to cut red tape for financial firms.
As the Government consults on legislative changes to the regime, including removing the certification regime and increasing flexibility for regulators to reduce the number of senior management functions which require pre-approval, the FCA said its own proposals aim to make the regime less onerous on firms.
Proposals include giving firms more time and flexibility to submit applications for approving new senior managers when there has been an unexpected or temporary change; stripping out duplication where the same individuals are certified for separate functions; and providing guidance on how to streamline the annual checks firms need to undertake to certify individuals are ‘fit and proper’ to do their role.
In addition, it would allow more time for firms to report updates to senior manager responsibilities.
Nikhil Rathi, chief executive of the FCA, said: “Integrity and accountability at the top matter, which is why there is widespread support for the Senior Managers and Certification Regime. We are proposing streamlining the rules, so they work better for industry and support competitiveness and our approach to outcomes-based regulation, while maintaining the high standards the regime has set.”
