While the Fos’ developing capacity to make increasingly significant financial awards has made headlines, the Fos’ real power derives from the fact that it is backed by the ever-present threat of the FCA. The FSMA and Fos insist that each case is resolved “quickly and informally” by reference to its particular circumstances, but the rules and regulatory regime combine to make the reality for firms more difficult. The revised memorandum of understanding between the FCA and the Fos provides for increasing flow of information between the two bodies, which has rendered the distinctions between the entities less certain for practical purposes.
The decision to publish Ombudsman decisions now threatens to intertwine the Fos with the work of the FCA. Firms have expressed alarm that Fos decisions will become enforcement in all but name. There is a very real basis for this concern. The “root cause analysis” rules in the complaints chapter of the FCA Handbook (DISP 1), in conjunction with the treating customers fairly principle, require firms to take into account Ombudsman decisions and otherwise rectify any systemic or recurring problems revealed, regardless of whether the other customers have complained.
Precedent
Firms will be very reluctant to let complaints become published decisions that might create adverse precedents which, in turn, might force them to conduct expensive past business reviews. They may feel compelled (of their own initiative) to address a systemic problem or be forced to admit to one by a claims management company or, worse, the FCA. The pressure on firms to settle even ill-founded complaints has become overwhelming.
The sheer volume of consumer complaints to Fos, their increasing size and the expanding jurisdictional reach of the Fos – linked to the enforcement powers of the FCA – create the conditions for a perfect storm. The publication of significant decisions has the potential to trigger that storm; whether through the firm being forced into the irrepressible conclusion that it has a problem, or, perhaps in combination, external agents such as claims management companies or, worse, the FCA asking difficult questions.
Robbie Constance is a partner and Imogen Hurst and Sam Bishop are associates of law firm Reynolds Porter Chamberlain
