Financial Conduct Authority 

FCA's history of punishing firms that ignore Fos revealed

FCA's history of punishing firms that ignore Fos revealed

The Financial Conduct Authority has taken action against just five firms in five years for failing to pay out redress which has been demanded by the Financial Ombudsman Service.

A Freedom of Information request submitted by FTAdviser revealed the FCA had enforced action against five companies between 2012 and 2016 for non-payment of Fos redress awards.

These figures simply relate to instances when the FCA enforced against individual firms and does not account for how many times the Fos had referred issues to the regulator against each company.

Figures from the ombudsman showed over this period the ombudsman had referred a total of 195 cases to the FCA for enforcement.

While the Fos figures account for all referrals to the regulator, FTAdviser understands the vast majority of these cases were referred because firms had failed to compensate consumers.

Firms which fail to comply with ombudsman decisions are notified that they have been reported to the FCA.

According to the FCA handbook, where a firm fails to comply with requirements it is sometimes appropriate to deal with the issue without the need for formal disciplinary or other enforcement action. 

The FCA states that supervision and monitoring of firms, as well as a cooperative relationship between firms and their supervisors, will in some cases lead the City watchdog to decide against taking formal disciplinary action. 

“However, in those cases, the FCA will expect the firm to act promptly in taking the necessary remedial action agreed with its supervisors to deal with the FCA's concerns."

Data from the ombudsman also showed that it only refers a very small number of cases to the FCA, having reported 195 cases to the regulator out of nearly two million cases which have been resolved between 2012 and 2016.

Tobias Haynes, trainee solicitor from Waterside Legal, said he was surprised by the figures, suggesting it raises questions about why the regulator is not doing more to punish businesses when they don’t comply with a final decision from the ombudsman.

“It doesn’t deter businesses from bad practices if the regulator is not being seen to take action,” he said, adding the figures make the FCA seem “toothless”.

But he also questioned whether some firms might get spooked once they are told they have been referred to the regulator, which prompts them to dish out compensation payments before the FCA has to take formal action.

Mr Haynes said this apparent lack of enforcement could have a knock-on effect on the industry as consumers completely steer clear of financial services because they are not reassured that the FCA will enforce action if firms fail to comply.

“The regulator needs to be seen to be making sure justice is done and that firms are being made an example of,” he said.

The FCA declined to comment.

Tony Catt, compliance consultant at TC Compliance, said the small number of enforcement cases indicates that referral back to the FCA appears to have had the desired effect of making the firms pay.