Andrew Bailey, chairman of the Financial Conduct Authority (FCA), has said the Authority is considering expanding the Financial Ombudsman’s remit to replace consumer redress schemes set by firms.
Speaking in front of the Treasury Committee, Bailey took issue with the predominance of customer redress schemes as the main means of addressing businesses’ grievances, like the complaints review process set up by RBS over its alleged mistreatment of SME customers.
Bailey said: “I have been on record for some time now saying I would much prefer this process was not done on a voluntary basis [on part of the firms].
“I do sympathise with the complainants that you can never get away from the fact that in this setup, the firm sets the scheme up [and] the firm appoints the people who deal with it. Although we go to lengths to say it has got to be done robustly, I think we would be better off if we got away from that.”
Bailey also lamented the limitations of schemes set up only to address specific grievances, after the facts occurred.
“It just doesn’t seem to me to be sensible that every time we get one of these things happening we have to set something new up. I think it would be much better if we had a standing scheme. We are planning to put out a consultation on this in the near future.”
He added that although he had considered the institution of a formal process for such cases, that would have required legislative backing, which he reckoned would not come.
He consequently moved onto the option of expanding the remit for the ombudsman, whose limits are set by the FCA but otherwise operates independently of it, to include SMEs beyond microbusinesses.
The prospect of a wider coverage for the ombudsman had been already raised in the FCA’s interim report on the RBS case last week.
Bailey added that a revision of the ombudsman’s powers would also be in order, in relation to the fines it can levy (which currently cannot exceed £150,000) and its function as an arbitration, rather than mediation, service.
Bailey said: “I have talked to [chief ombudsman] Caroline Wayman quite a bit about this.
“She is well aware of this but this will be an important point to be addressed in this consultation.
“This is quite a change to the nature of the service that they provide.”