The regulator is revising its complaints process to make it more user friendly and clarify its position on compensation, in particular goodwill payments.
In a 62-page consultation paper, published yesterday (July 20), the financial watchdog has teamed up with the Prudential Regulation Authority (PRA) and the Bank of England to see how it can change the complaints scheme so that it becomes more accessible to its main users - consumers and small businesses - as well as others.
The paper sets out what additional information the regulators will include to clarify their position on voluntary (ex-gratia) compensation payments.
Under the scheme the regulators are able to make compensation payments either as an acknowledgment of regulatory shortcomings or of the fact that the complainant has suffered distress or inconvenience or financial loss.
But these are often small payments as the scheme is not designed to deal with complex issues and the regulators are funded by fees paid by firms and therefore “the costs will ultimately fall on the firms”.
The paper proposes to distinguish between payments made in relation to distress or inconvenience, and those in relation to financial loss, and includes guidance to help the regulators decide the appropriate compensation amount.
It suggests that up to £250 is paid where the complainant has experienced a moderate level of distress and inconvenience, £250-£500 is paid for a high level and £500-£1000 is paid for a very high level.
In cases of financial loss, the regulators only make a payment where documentation is provided to evidence this.
When deciding the level of compensation in these circumstances, the paper suggests a number of factors to calculate the relevant amount.
- The seriousness, nature and duration of the regulators’ failing(s) and the consequences for the complainant;
- The amount of the complainant’s evidenced and foreseeable financial loss;
- The complainant’s individual circumstances; and
- The extent to which the issue, which has resulted in the complaint, is within the regulatory remit.
Any payment relating to a financial loss will not exceed £10,000, apart from in exceptional circumstances, but the regulators said “in most cases we would expect any compensatory payment we make to be lower than this”.
According to data from the Complaints Commissioner, between January 2017 and December 2019 most of the payments from the FCA were for amounts of £250 or less, with the most common payment amount being £50.
There were nine payments in total for amounts greater than £1,000, with only three payments being for amounts greater than £10,000.
The regulators have also proposed changing the language used in the complaints process by simplifying its wording and make it more user friendly.
They also want better use of diagrams to help users navigate the process and to address users directly throughout.
By doing this, the regulators said it will help users spend less time working out how to use the scheme and will ensure they have realistic expectations of what their outcome could be.
It will also mean the regulators and the Complaints Commissioner will spend less time explaining the scheme and dispelling misunderstandings.
It is expected these changes will be implemented “as soon as practicable” and any complaints made after this period will be dealt with under the revised scheme.