The appointment of a Financial Services Ombudsman in Jersey came a step closer on 1 April 2014 when the States of Jersey approved the Financial Services Ombudsman (Jersey) Law 201- (the Law). The Law, once approved by the UK Privy Council, will establish an Ombudsman to adjudicate complaints from customers in relation to financial services provided in Jersey. The Ombudsman will be able to make awards to return complainants to the position they would have been in had the problem not occurred.
Who will be able to complain?
Certain categories of persons will be eligible to complain to the Ombudsman including individuals, small businesses, charities, trusts and foundations.
The intention is that the service should be primarily available to persons lacking the resources or expertise to use other means to resolve complaints. The service will be available to complainants resident anywhere, not just to Jersey residents.
What can complaints be about?
Complaints are restricted to acts in the course of relevant financial services business provided in or from within Jersey. Relevant financial services business is defined broadly. However, certain classes of business that are not appropriate to be covered by the Ombudsman must, after consultation, be exempted by Order. A draft Order was published on 21 March 2014. It exempts all business except for:
- deposit-taking business
- money service business
- the business of a functionary relating to a recognized fund
- general insurance mediation business
- insurance business
- investment business
- pension business
- credit business and
- ancillary business relating to the above.
Under the draft Order, most trust company business (except that relating to business, such as pension business, listed above), occupational pensions and fund business relating to funds other than recognized funds are outside the scope of the scheme.
A consultation on the Order is ongoing. The closing date for submissions is 8 May 2014.
When must complaints be made?
A complaint must be made to the Ombudsman within six years of the act to which it relates or two years after the complainant should have become aware of the cause for complaint. The complaint must relate to an act that occurred after 1 January 2010 and the financial services provider must have been given a reasonable opportunity (capped at three months) to consider the complaint.
However, a shorter time limit will apply, so that a complainant must refer the complaint to the Ombudsman within six months of receiving a final response on the complaint from the financial services provider, if the provider meets certain requirements for handling complaints. For the shorter time limit to apply the provider must notify clients of the availability of the Ombudsman scheme and the six month time limit. This shorter time limit is likely to mean that financial services providers amend their procedures accordingly.
What award may the Ombudsman make?
The Ombudsman may require that the financial services provider compensate the complainant for their financial loss and any material distress or inconvenience. The maximum amount that the Ombudsman can award will be £150,000.
Is the Ombudsman's determination binding?
If the person making the complaint accepts the determination, it is binding. There is no right of appeal, so no further legal action can be taken on the same subject matter except for judicial review.
What will be the cost of the scheme and how will it be funded?
It is estimated by the Economic Development Department that the set up costs for the scheme will be in the region of £183,000 and that the first year's operating costs will be in the region of £582,000. The Office of the Financial Services Ombudsman will, at the outset, have a Board of three members, one part time Ombudsman and a staff of five people.
The scheme will be free to complainants and will be funded by financial services providers. It will be paid for by levies on financial services providers and by case fees charged to providers in respect of complaints against them. A further consultation with industry will cover more detail of the proposals for funding.
Will Guernsey be involved in the scheme?
It is planned that a joint Jersey and Guernsey Ombudsman scheme will be established from the outset. There will be a shared single office in Jersey with a shared staff and Board. The legislation for the Guernsey scheme is currently being drafted but is expected to be similar. There is some precedent for joint Channel Islands initiatives like this, for example the Channel Islands Competition Regulatory Authority.
When will the Ombudsman scheme be running?
The Economic Development Department considers that is unlikely that the scheme will be established before December 2014.
How can I be ready for the scheme?
You should consider whether you would like to take advantage of the six month time limit for complaints to be made and, if so, be prepared to make amendments to client-facing documents to notify clients that the scheme is available and to inform them of the six month time limit. You should also be ready to ensure that your procedures for complaints handling conform to the model procedure for complaints handling once it is published by the Ombudsman.