The Financial Ombusdman Service (FOS) is readying for small business complainants on the assumption that the Financial Conduct Authority (FCA) will expand its remit, chief ombudsman Caroline Wayman has said, adding that there is currently no plan to increase the maximum award of £150,000 (€168,000).
Speaking to Parliament’s Treasury Select Committee, Wayman said the FOS was preparing “on the basis that the extension will happen”, and that it would be ready if and when the FCA decides give small businesses access to the consumer-focused resolution service.
Wayman added that current discussion with the FCA did not contemplate increasing the maximum award beyond the current £150,000, and said “more formal mediation might play a part” under the expanded remit.
“We are very much engaging again with stakeholders to seek views about, first, the sorts of disputes that will come to us, but also getting input from the people affected by these issues,” she said. “We are preparing on the basis that that expansion does happen.”
Her comments came as part of the Committee’s examination of an independent review into the FOS, led by Richard Lloyd, chairman of claims management company Resolve and former Which? executive. The review was spurred in March by a Channel 4 Dispatches exposé documenting mishandling of cases by ombudsmen.
The review concluded that ombudsmen found themselves ill-equipped for the numerous and highly complex cases brought before them, specifically following a 2016 restructuring of the FOS’s internal operations. It also criticised how PPI mis-selling had been handled by firms involved, which resulted in the FOS being inundated with PPI cases.
Lloyd said he wanted to see the regulator “imposing good redress schemes” on firms in case of issues affecting customers on a large scale, as opposed to the current model of companies telling individual customers to either rely on the internal complaints scheme or refer to the FOS.
“I think what has been missing in the debate about the FOS is that there is a bigger, in my view more effective, way of tackling these kinds of systemic or widespread consumer harms earlier,” Lloyd said.
“That is for the FCA to use that power better to force the firm to put things right in the first place, proactively contacting its customers, saying, ‘This is what we are going to do to put it right’, [rather] than to wait for the individual complaints to work through the system and potentially to end up at the FOS.
“We are addressing the solution too far down the pipeline. I think we need to force firms to sort out complaints properly on a mandatory basis, using the powers that exist rather than to have them swept at the end through individual complaints.”
Asked by the Committee if it would not be too ambitious for the FOS to take on a new class of customers at this stage, Wayman said: “We absolutely can and will be ready. I would not say that if I did not think we could … I do not think it is a bridge too far for us.”
RBS to close GRG complaints scheme
Wayman’s comments came just 48 hours before RBS announced it would be closing down the complaints scheme for former customers of Global Restructuring Group (GRG) in October.
The scheme, overseen by retired High Court judge William Blackburne, was set up in 2016, alongside the automatic refund of fees incurred by GRG customers. The bank said it had received 1,230 complaints out of 16,000 eligible customers, of which 803 had been brought to a close and 370 upheld. It also received four cases over consequential losses, which it started accepting in May.
Following the closure of the scheme, former GRG customers will only be able to complain through the bank’s regular channel, without appeal to a third party.
The GRG case saw RBS accused of mistreating SME borrowers referred to the turnaround unit, and spurred increasingly louder calls for smaller businesses to be given access to dispute resolution tools beyond banks’ own redress schemes.
Shortly after the findings of an independent review into GRG, highlighting “undue focus” on RBS’s income over clients’ turnaround, the FCA said it was looking to expand the FOS’s remit to include commercial clients.
Industry body UK Finance has also commissioned a review into the alternative dispute resolution landscape for SMEs, and access to finance for smaller companies is the subject of at least two Parliamentary Committee enquiries.