More consumer bodies given right to bring "super-complaints" to financial regulators

Out-Law News | 14 Mar 2013 | 9:13 am | 2 min. read

Bodies representing consumers and small businesses can now apply to be designated as a 'super-complainant', making it faster and easier for them to raise concerns about financial products with the new regulator, the Treasury has announced.

The Financial Conduct Authority (FCA), which will take on the conduct and compliance remit of the current Financial Services Authority (FSA) from 1 April, will be required to investigate super-complaints and publish a response within 90 days. The new mechanism gives consumer bodies that have been approved by the Treasury the ability to hold the regulator to account for its response to consumer protection issues.

The Treasury has also published finalised guidance for bodies seeking designation as super-complainants (16-page / 219KB PDF), setting out its criteria for granting the designation and summarising the information that applicants should supply. The first application round closes on 4 June 2013, and the Treasury will announce the first super-complaints later this year, it said.

Greg Clark, Financial Secretary to the Treasury, said that extending the super-complaint regime to bodies representing "small and medium-sized enterprise consumers" of financial services would help ensure that problems affecting them would be treated as a high priority. The new regime was a "big step forward for consumers in general", he added.

"Knowing that there is a route for bodies representing consumers of financial services to bring consumer protection and competition problems to the FCA's attention and hold it accountable for providing a response will be vital to rebuilding trust in financial services," he said. "This will support swifter intervention by the FCA in future, and I am pleased that SMEs will benefit as well as individual consumers."

Amendments to the Financial Services and Markets Act (FSMA) give designated consumer bodies, regulated persons and the Financial Ombudsman Service (FOS) the right to make a super-complaint to the FCA if they consider that features of a market for particular financial services are, or may, significantly damage consumer interests. Features could include market structure, a lack of competition or the conduct of firms operating within a particular market.

The new regime will not affect the ability of individuals and businesses to bring independent complaints to the FCA or to the FOS, which deals with individual consumer complaints against financial institutions. However, the Government said that consumers were less likely to have access to the kind of information necessary to be able to bring this sort of complaint. Consumer groups, on the other hand, are more likely to be able to judge whether there is a market failure due to their access to individual complaints, it said.

The new regime will operate separately to the super-complaints regime operating under the Enterprise Act, which allows consumer organisations to bring super-complaints to consumer protection regulator the Office of Fair Trading (OFT). Consumer bodies seeking designation under both regimes should pursue separate applications. However, the Treasury guidance confirms that it will cooperate with the Department of Business, Innovation and Skills, which deals with designation applications under the Enterprise Act, in order to "minimise duplication of process where possible".

According to the guidance, in order to qualify for super-complainant status bodies must be constituted as independent and impartial and must be able to demonstrate "considerable experience and competence" in representing consumers. Where it appears to the Treasury that the body primarily represents the interests of businesses, it must be able to demonstrate that those businesses are mostly small or medium-sized.

Possible responses open to the FCA after a super-complaint could include plans to consult on an issue, regulatory or enforcement action or an explanation of why it is taking no action, according to the Treasury.