Ombudsman calls for earlier intervention by financial regulators

Chief ombudsman Natalie Ceeney said that regulators must act faster when it becomes obvious that there are problems over widespread mis-selling or particular financial products.

In the UK the FOS has the power to resolve individual financial disputes. Ceeney said curtailing the length of time that disputes last would help the body resolve issues.

"The longer any consumer detriment is left to build up, the harder it is to resolve," Ceeney said in a speech at a conference held by the Financial Services Authority.

"Attitudes – both on the part of consumers and of firms – become entrenched. And the scale of the costs of redress rise – hardening attitudes yet further and making resolution harder still to achieve," Ceeney said in her speech.

"I believe the consensus is that the sooner the regulator can intervene, the better," Ceeney said.
Ceeney was addressing a conference held by the financial regulator the Financial Services Authority (FSA).

Earlier this year the FSA was embroiled in a long-running dispute over customers' compensation for mis-sold payment protection insurance (PPI).

In April a High Court judicial review into PPI complaint handling procedures dismissed the BBA's attempts to overturn the FSA's rules. The BBA then dropped plans to appeal the High Court's decision after Lloyds and Barclays withdrew their support.

The FSA recently announced it was giving Lloyds, Barclays and the Royal Bank of Scotland (RBS) an extension of time to deal with outstanding PPI complaints.

At the end of 2012 a new body, the Financial Conduct Authority (FCA), will take over the FSA's responsibilities for protecting consumers and markets’ regulation.
 
Ceeney said that the FCA should look at measures to better join up the way that current rules over customers redress apply.  She said she was encouraged by Government plans to give powers to a number of designated bodies that would allow them to refer "systemic or mass issues" to the FCA, and approved plans to allow the FCA to intervene early in disputes.

"These measures should – together – make a significant difference.," Ceeney said.

"They will give firms a higher level of certainty about approaches to redress before levels of consumer detriment build. They will ensure consumers get redress earlier. And the measures should also help avoid some of the reputational damage for the industry that’s occurred in the past," Ceeney said.

"And for the ombudsman service – the measures should be very helpful in allowing us to avoid dealing with tens (or indeed hundreds) of thousands of cases involving the same issue," Ceeney said.

The FCA should help establish a culture within financial firms that will identify risky practices that are unfair to customers, even if they are within the rules, Ceeney said.

" In far too many complaints, firms focus on a defence of 'we were following the rules' –  when common sense tells you that what the firm has done has breached the fundamental principle of 'treating customers fairly'," Ceeney said in her speech.

"However good the rules of the FSA (or FCA), they can never be so comprehensive as to be exhaustive. But a risk-based approach – and a culture within firms that puts the focus firmly on being fair to the customer – should do a huge amount to help reduce poor practice," Ceeney said.

"That – quite simply – will not only give firms greater clarity about the standards they are working to. It will also reduce the number of complaints they receive," Ceeney said.