In recent weeks the performance and powers of the FOS have been under intense scrutiny with its own Annual Review, the BBA’s judicial review of the PPI complaints rules and FSA announcements about award limits and rule changes. Pressure is also mounting on the FOS in the wake of a leaked draft letter to the Treasury about restricting its future role and separate claims that FOS staff are rushing through complaints in order to meet their target-based bonuses. But the FOS has already been fighting back.
Seven of the financial service industry’s most influential trade bodies (the ABI, AIFA, BBA, BSA, CML, the Association of Financial Mutuals and the UK Cards Association), identified a six-point list of proposals that aim to retrench the power of the FOS. The group of signatories are of the view that the power of the FOS has become too great, going beyond its core function and encroaching on the role of regulators. They propose that:
- The FOS’s role and relationship with the FCA should be set out clearly in statute to give firms confidence that if they comply with FCA regulations they will not face retrospective interpretations of the rules;
- The FOS should be removed from the process of determining regulatory issues with wider implications to stop the FOS straying into regulatory functions;
- Consideration should be given to CMCs being regulated by the FCA rather than the Ministry of Justice and to CMCs contributing to funding the FOS;
- The FOS’s right to prevent firms taking test cases to court when important or novel points of law are in evidence should be removed;
- The FCA should undertake regular reviews of the FOS’s operations, policies and procedures but not compromise the FOS’s operational independence;
- The FOS should be required to consult with stakeholders before issuing policy notes or guidance.
In addition to these suggestions, a former FOS adjudicator has accused the FOS of rushing through claims in order to meet targets. Jane Sanders recently claimed that the adjudicators must close a certain number of cases per week (previously 3.5) to receive a bonus. Ms Sanders also suggested that the eight-week time frame in which the adjudicators are expected to complete a matter is not sufficient. The implication is that adjudicators endeavor to meet their targets rather than give due time and consideration to each file.
This may go some way to explaining the erratic adjudications seen from the FOS over recent months. Some complaints have been dealt with remarkably swiftly and some only after interminable delays but the range of quality of decisions appears unconnected to the time taken. We have seen very poor decisions in all types of cases:
- reference made to the wrong rules;
- untenable assumptions about matters of fact;
- opposite decisions reached by different adjudicators on the same facts;
- statements of principle not then applied to the circumstances of the case; and
- blatant hindsight
The list goes on… We have also been told by clients (but have seen no announcements from FOS) that it is trialling short form responses - bare summaries of the conclusions reached in a particular case. Only the FOS can explain how this sits with new rules on taking account of Ombudsman determinations and principles of justice which entitle a party to a dispute to know the findings and reasons behind a decision imposed upon them.
The FOS is being watched as never before and it will be telling to see whether it enjoys the limelight or tries to retreat out of the spotlight. Perhaps as a sign of its preparedness to fight its corner, in responding to criticism about the increased maximum award limit of £150k, the FOS reportedly pointed out that only 0.2% of cases resolved related to payments of over £100k. At the same time as its powers increase, the FOS plays down its significance.
As I explained in my blog last week, the FOS features in the draft Financial Services Bill so all these issues will no doubt be discussed during the Parliamentary scrutiny of the Bill. If the industry wants to force change on FOS (including introducing a long stop time limit), the route may be through amendment when the Bill passes through Parliament.