FOS Limit increased and changes to Complaints Handling arrangements

The FSA are inviting comments on the "Final Rules" by 31st August 2011 on CP11/10 : Consumer Complaints: The Ombudsman Award Limit and changes to the complaint handling rules.

From 1st September 2011 Firms will be required to identify a senior individual within the Firm responsible for complaints handling. Firms are also expected to take into consideration the findings of FOS and undertake root cause analysis. Further guidance is to be published by the FSA.

FOS have published some useful guidance notes for Firms and these may be found at

 http://www.financial-ombudsman.org.uk/faq/index.htm

From 1st January 2012 the maximum FOS award limit will increase from £100,000 to £150,000. This higher figure will then apply to any eligible complaint case referred to FOS after this date regardless of when the cause for the complaint took place.

From 1st July 2012 the two stage approach to dealing with complaints will be abolished.  The FSA expects Firms to deal with complaints more promptly and accepts that there may be a 5 - 30% increase in the numbers of complainants that take the matter to FOS.  Firms will still be expected to issue a "final response" letter within 8 weeks.

The FSA will also be issuing a joint communication with the Claims Management Regulator, FOS and FSCS concerning Claims Management Companies aka Ambulance Chasers.  The communication will make it clear to Consumers that Claims Management Companies are permitted to charge a fee for handling the referral of a complaint to the Ombudsman service and the issues a consumer should consider when choosing to use a CMC.

The Paper also makes references to changes to the definition of "eligible complainant" and in particular the scenario where an individual has been subject to identity theft and is being pursued by debt recovery teams on behalf of Regulated businesses.

Client Money - more changes expected

The FSA were planning on introducing changes to client money controls and requiring Firms to appoint a CF10a (Controlled Function responsible for Client Money). These planned changes are pressing ahead for Large and Medium Size Firms.  Such Firms will also be required to report on a monthly basis & will already have been contacted directly by the FSA.

All other Firms that are authorised to hold / control client money will be contacted at the beginning of July - and will be required to provide details to the FSA of the highest balance held on the Client Money Account during the period Jan - June 2011. 

Ultimately, the FSA wants all other Firms to provide the data on a half yearly basis - those not currently on the radar but who held significant client funds during the period will be added to the Large / Medium Firms list. 

Further details may be found at http://www.fsa.gov.uk/pubs/cp/cp11_04.pdf   - Chapter 3.  Annex B gives details of the additional data to be collected.  This requirement only applies to Monies held under the CASS requirements and as a result those Firms which hold client monies and also have risk transfer arrangements in place will need to be able to clearly segregate the two.

This is still at the consultative stage and we can expect final confirmation from the FSA in April /. May. 

Retail Distribution Review Timetable

Further Consultation papers are expected from the Financial Services Authority concerning :

Retail Distribution Review (RDR) - changes to the GABRIEL Reporting requirements inc Complaints; Product Disclosure charges following the introduction of Customer Agreed Remuneration; Capital Requirements and how to apply a consistent approach to expenditure based requirements (EBR).

By the end of 2011 - all IFA's (the FSA prefer to call them Personal Investment Firms or PIF's) must have arrangements in place to monitor and evidence that they hold the greater of £15,000 or one months EBR.

By the end of 2012 - Learning statements need to be in place and ALL advisers should have acquired the necessary level four qualifications plus gap filling where required.  All advisers need to be operating on a Customer Agreed remuneration / Consultancy Charging model . All advisers should describe their services as restricted or independent.

By the end of 2013 -  all PIF's will need to hold a minimum of 3 months EBR or £20,000.