Key Consumer Duty developments and recent communications issued by both AMI and the FCA, with commentary on implications for mortgage intermediary firms…
It was early November 2020 that Caroline Wayman, Chief Executive and Chief Ombudsman at the Financial Ombudsman Service, sat in front of the Treasury Select Committee to be challenged by Chair Mel Stride and other MPs on the Service’s work. For anyone that has not watched or been involved in any of these sessions before, it is not a particularly pleasant experience for those giving evidence. However, it is democracy in action and a wholly necessary process to examine and scrutinise in greater depth public bodies such as FOS that, in this case, are funded by fee paying firms. It is the only place where our regulatory bodies can be held to account in public.
Having watched the session, it was disappointing that it did not fully address the issues around FOS’ timeliness on complaint handling and specifically how many complaints are sitting in the pipeline as an overhang from previous years. The lack of detailed responses to questions demonstrated either a lack of knowledge or a desire to keep a veil over the problems. At AMI we have been and are concerned about FOS’ lack of transparency in this area and have previously requested data directly from FOS on outstanding complaint levels, only to be met with the response that the data hadn’t been published that way for open cases. Now we understand this reluctance, as a series of letters between Caroline Wayman and Mel Stride published recently laid bare the true extent of the backlog.
As of 26 November 2020, there are just over 5,000 open non-PPI FOS cases which are more than two years old. That’s 5,000 consumers – and not forgetting firms – that are awaiting a conclusion and unable to move on with their lives. AMI has called on FOS, in our response to its annual plan and budget (2021/22), to publish more details on the age of complaints as part of its annual consultation but it’s a shame that this information had to be dragged out of them and only once probed by the TSC.
Whilst nobody anticipated that a global pandemic would cause so much havoc on our lives, the fact that FOS hasn’t made the headway it wanted on resolving complaints cannot be totally attributed to Covid. It seems that delays have been an escalating problem caused by, we suspect, a restructuring of the organisation in 2016 with a shift away from core specialisms to a structure where investigators are able to pick up a large proportion of any casework after completing a six-month academy training. We wouldn’t expect advisers to be a jack of all trades as financial products and associated advice is complex, so why should FOS use this approach? Is this why as at end of November there were also 37,689 cases that had been with the Service for more than 8 weeks and not yet allocated to an investigator?
Mel Stride said in a recent interview with BBC Radio 4 that FOS, “is an organisation that needs to sharpen up”. It’s clear that urgent improvements are needed, as the wider implications of the delay in dealing with complaints are significant. AMI is concerned that delays elongate the time where poor firms are continuing to advise and sell, making it more likely that the firm will fail due to the number of cases that build up. An iceberg which silently grows with no one aware of the disaster lurking beneath until it hits and causes waves. The industry was dealt a blow when FSCS confirmed that compensation costs will rise to £1bn this year, a figure that leaves me saddened. AMI considers that FOS delays in case handling are likely to have contributed to this increase, but also leaves a huge concern that there may be more lurking amongst the backlog. Complaints that will be found justified against firms could eventually hit the FSCS. The sharpening up and speeding up needs to be now, as the firms that pay for the service deserve a fair deal.
Chief Executive, AMI