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CeMAP 1 - UKFR > Topic 25 > Flashcards

Topic 25 Flashcards

Consumer rights, complaints and compensation

1
Q

What are four key rights consumers have when buying goods or services in the UK?

A

Clear and honest information before purchase

To get what they pay for

Goods fit for purpose and services performed with reasonable care and skill

Faults corrected free of charge or a refund/replacement

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2
Q

What did the Consumer Rights Act 2015 replace?

A

The Supply of Goods and Services Act 1982 and the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs)

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3
Q

When did the CRA come into force and to which contracts does it apply?

A

It came into force on 1 October 2015 and applies to consumer contracts entered into from that date onwards.

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4
Q

What five areas does the CRA 2015 cover?

A

Faulty goods

Faulty digital content

Services not matching agreed terms

Lack of reasonable care and skill in services

Unfair contract terms

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5
Q

What must a business do if it provides a service not in line with the agreement or not with reasonable care and skill?

A

Align the service with the agreement or, if not realistic, provide a refund.

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6
Q

What flexibility does the CRA give to regulators like the FCA and Trading Standards?

A

Greater flexibility to respond to breaches of consumer law.

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7
Q

What is the purpose of ADR under the CRA 2015?

A

To reduce court disputes and resolve disagreements between businesses and consumers more quickly and cost-effectively.

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8
Q

What must a business do if a dispute arises with a consumer?

A

Engage a certified ADR provider and check if the consumer is willing to use the service.

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9
Q

What are the main ADR options?

A

Mediation, adjudication, and arbitration.

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10
Q

What distinguishes arbitration from mediation?

A

Arbitration decisions are binding and enforceable in court, whereas mediation results in a facilitated agreement.

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11
Q

What contracts are affected by the CRA’s unfair contract terms rules?

A

All consumer contracts and notices between a business and a consumer.

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12
Q

What makes a term or notice unfair under the CRA?

A

If it causes a significant imbalance to the detriment of the consumer and breaches good faith.

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13
Q

What happens if a contract term is deemed unfair?

A

It is not binding unless the consumer agrees to it; the rest of the contract can still be valid if practicable.

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14
Q

Name three types of terms that may be considered unfair.

A

Excessive cancellation charges for unused services

Letting the business define the contract terms after the consumer is bound

Letting the business set the price after the consumer is bound

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15
Q

What is meant by contract transparency?

A

Terms should be written clearly and understandably; unclear terms are interpreted in favour of the consumer.

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16
Q

What does ‘good faith’ mean in contract terms?

A

Terms must not create a significant imbalance between parties to the consumer’s detriment.

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17
Q

What powers does the FCA have regarding unfair terms?

A

It can require firms to amend/remove unfair terms and apply to court to prevent their use against existing customers.

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18
Q

What guide outlines how the FCA uses its powers on unfair terms?

A

The FCA’s Unfair Contract Terms and Consumer Notices Regulatory Guide (UNFCOG).

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19
Q

What is one key message from the FCA on contract fairness?

A

Fairness should be part of prudent business management, not in opposition to it.

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20
Q

What should firms avoid when assessing contract terms?

A

Using technicalities to justify potentially unfair terms.

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21
Q

Does the absence of a term from Schedule 2 guarantee fairness?

A

No – firms must still assess fairness under the CRA as a whole and in context.

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22
Q

Why is consumer protection particularly important in financial services?

A

Because financial products are often complex, and unsuitable advice or products can have serious long-term consequences for consumers.

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23
Q

What is one of the FCA’s operational objectives related to consumers?

A

To protect consumers from bad conduct in financial services and make it easier for them to complain and seek redress.

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24
Q

What can customers do if they are not satisfied with a firm’s complaint response?

A

They can refer the complaint to an independent ombudsman bureau.

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25
What responsibility do consumers still hold despite protections?
Consumers must take responsibility for their own purchasing decisions.
26
Can the FCA protect investors from falling stock market values?
No, but it can educate consumers about investment risks.
27
What are the limits of the Financial Services Compensation Scheme?
It offers compensation but within set limits.
28
What is the role of HM Treasury?
It controls public spending, sets economic policy, and regulates financial services under the Chancellor of the Exchequer.
29
What does HMRC do in relation to financial services?
Collects taxes, administers financial support, and interacts with providers and consumers through self-assessment and pension contributions.
30
What does the Department for Work and Pensions (DWP) do?
Manages welfare, pensions, and benefits including state pensions and disability benefits.
31
What is the role of the National Crime Agency (NCA) in financial services?
Tackles financial crimes such as money laundering, fraud, bribery, and counterfeiting.
32
What is MaPS and what did it replace?
The Money and Pensions Service, which replaced the Money Advice Service, The Pensions Advisory Service, and Pension Wise.
33
What is the consumer-facing brand of MaPS?
MoneyHelper.
34
What are the five core functions of MaPS?
Pensions guidance, debt advice, money guidance, consumer protection, and long-term financial capability strategy.
35
What is the role of Which? in financial services?
It campaigns for consumer rights, provides independent advice, and can make ‘super-complaints’ to the FCA.
36
What is a ‘super-complaint’?
A formal complaint made by designated consumer bodies to the FCA about systemic problems in the financial services sector.
37
What does Citizens Advice do?
Provides free, confidential, and independent advice to the public, and also has ‘super-complaint’ status.
38
How does Citizens Advice support equality?
By valuing diversity, championing equality, and challenging discrimination.
39
What are the two main FCA Handbooks that set out complaints and compensation rules?
DISP (Dispute Resolution: complaints) and COMP (Compensation Handbook).
40
What does the DISP section cover?
How complaints should be handled by firms, payment providers, and the Financial Ombudsman Service (FOS).
41
How does the FCA define a complaint?
Any oral or written dissatisfaction about a financial service or redress determination alleging financial loss, material distress, or material inconvenience.
42
Who is an eligible complainant according to the FCA?
Private individuals, small businesses (under £6.5m turnover and <50 staff), small charities, trustees (net assets < £5m), and micro-enterprises (under 10 employees and turnover < €2m).
43
What must firms do when they receive a complaint?
Acknowledge promptly, investigate, resolve, keep the customer informed, advise them of FOS rights, and provide a final response letter.
44
What is the timeframe for responding to complaints in general?
Firms must resolve complaints within eight weeks and inform customers if they can refer to the FOS.
45
What is the response timeframe for payment service providers?
Within 15 days, extendable to 35 days in exceptional cases with a holding letter.
46
What must a firm’s complaints procedure include?
It must be fair, prompt, and handled by someone competent and uninvolved in the original issue.
47
How often must firms report complaints data to the FCA?
Every six months.
48
What must firms do about the root cause of complaints?
Investigate the cause and take action to prevent recurrence.
49
What responsibility must a firm assign regarding complaints compliance?
An individual in a governing function must oversee complaints compliance.
50
What is included in the final response letter?
It must address the complaint adequately and inform the customer of their right to contact the FOS within six months.
51
When can firms adopt a less formal approach to complaint resolution?
When a complaint can be resolved by close of business on the third working day after receipt.
52
What must a firm provide if a complaint is resolved quickly?
A summary resolution communication, not a full final response letter.
53
What does the summary resolution communication include?
A note that if the complainant is still dissatisfied, they can refer the matter to the Financial Ombudsman Service (FOS).
54
What is "root cause analysis" in the context of complaints?
Investigating the underlying causes of complaints to identify systemic issues and improve services.
55
How long must firms keep complaint records?
At least three years from the date received.
56
How long must complaint records be kept for UCITS or MiFID business?
UCITS: Minimum five years MiFID: Five to seven years
57
What complaint data must firms report to the FCA every six months?
Number of complaints received Complaints closed (in <4 weeks, 4–8 weeks, >8 weeks) Complaints upheld Complaints outstanding at period start Total redress paid Root causes and corrective actions
58
When are firms required to publish complaints data?
If they receive 500 or more complaints in a six-month period.
59
Who can raise a super-complaint to the FCA?
Designated consumer bodies, regulated persons, and the FOS.
60
What is a super-complaint?
A complaint that identifies features of a financial services market that may significantly harm consumer interests.
61
How long does the FCA have to respond to a super-complaint?
90 days.
62
What might the FCA include in its response to a super-complaint?
Plans to consult Timetable for regulatory action Explanation of current action Reasons for no action Internal research or public information requests Reviews of regulated firms
63
When can a customer approach the Financial Ombudsman Service (FOS)?
After the firm's internal complaints process is complete and the customer remains dissatisfied.
64
What legislation created the Financial Ombudsman Service?
The Financial Services and Markets Act (FSMA) 2000.
65
Is FOS membership voluntary?
No, it is compulsory for all FSMA-authorised firms.
66
How is the FOS funded?
Through a general levy on firms and case fees from the fourth complaint onwards each year.
67
Who makes final decisions at the FOS?
Ombudsmen, who are senior staff members.
68
Are FOS decisions binding?
Binding on firms, but not binding on complainants, who may still go to court.
69
What methods does the FOS use to resolve complaints?
Mediation, investigation, and formal assessment.
70
What factors does the FOS consider when resolving a complaint?
Relevant law and regulations FCA rules, guidance, and standards Codes of practice Good industry practice at the time
71
What are the time limits for bringing a complaint to the FOS?
Within 6 months of the final response Within 6 years of the event Or within 3 years of when the complainant became aware of the issue (whichever is later)
72
Can firms reject complaints that are time-barred?
Yes, but they must explain this in the final response and inform the complainant that the FOS may waive the time limits in exceptional cases.
73
Will the FOS consider complaints that are already in court?
No, it usually will not consider complaints that are the subject of legal proceedings.
74
What is the purpose of FOS compensation awards?
To restore the complainant to the financial position they would have been in if the issue hadn't occurred – not to punish the firm.
75
What does the Pensions Ombudsman Service (POS) deal with?
Complaints and disputes about the running of personal and occupational pension schemes and the Pension Protection Fund (PPF).
76
What must be shown in complaints to the POS?
Evidence of maladministration leading to injustice (e.g. financial loss, distress, delay, or inconvenience).
77
What is the difference between a complaint and a dispute?
Complaint = about maladministration Dispute = disagreement about facts or law
78
What types of complaints does the POS not deal with?
Complaints about sales and marketing of pension schemes (handled by FOS) and state pensions.
79
Who can make a complaint or dispute to the POS?
Members or ex-members of pension schemes Spouses, widows or dependants of members Employers, trustees, managers Legal representatives of those affected
80
What must be done before contacting the POS?
The complaint or dispute should first be taken up with the scheme’s managers or trustees.
81
What is the time limit for raising issues with the POS?
Three years from the event, excluding any time spent going through the scheme’s internal complaints process.
82
Who makes final decisions at the POS?
Ombudsmen, appointed by the Secretary of State for Work and Pensions.
83
Are POS decisions binding?
Yes, decisions are binding on all parties and can be enforced in the courts.
84
What is the main purpose of the FSCS?
To compensate customers who lose money due to the insolvency of an authorised firm.
85
Who oversees and funds the FSCS?
Jointly overseen by the PRA and FCA, and funded by levies on authorised firms.
86
What are the conditions for a claim to be valid under the FSCS?
The firm must be in default The customer must suffer financial loss The customer must be eligible under FCA rules
87
Does FSCS cover losses from poor advice or falling investment values?
No – only covers losses from firm insolvency, not negligence or market loss.
88
Who is primarily protected by the FSCS?
Private individuals and small businesses. Large businesses are mostly excluded, except in deposit and insurance claims.
89
Are firms in the Channel Islands or Isle of Man covered by the FSCS?
No, FSCS does not cover them.
90
What is the FSCS deposit protection limit?
£85,000 per person per firm Up to £1 million for temporarily high balances (e.g. from a house sale, inheritance, etc.)
91
What must a person do to claim under the £1m temporary high balance cover?
Provide proof that the money is held temporarily due to a life event (e.g. divorce, redundancy, inheritance).
92
What is the FSCS compensation limit for investments?
100% of £85,000 per person per firm
93
What is the FSCS compensation limit for home finance (mortgages)?
100% of £85,000 per person per firm
94
What protection does FSCS offer for debt management firms?
Up to £85,000 for money held by a failed debt management firm
95
What is the FSCS compensation for insurance companies?
100% for long-term insurance and certain general insurances (e.g. death/disability) 100% for compulsory insurance (e.g. motor) 90% for other general insurance – no upper limit
96
What is the FSCS compensation for insurance brokers?
90% of the claim – no upper limit

CeMAP 1 - UKFR (25 decks)

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