Topic 25: Consumer Rights, Complaints and Compensation Flashcards
What are Time-barred complaints?
If a customer is not satisfied with the firm’s response to a complaint, they have the right to refer it to the Financial Ombudsman Service (FOS). There is a time limit for referrals to the FOS – the later of six years from the event giving rise to the complaint, or three years from when the complainant should have become aware that they had a reason to complain. Any complaint made to the firm or referred to the FOS outside those time limits would be ‘time barred’ and the firm or the FOS can reject the complaint.
What is the Pensions Ombudsman Service?
Deals with complaints about the management and administration of occupational and personal pensions that led to injustice (financial loss, distress, delay or inconvenience). It does not deal with issues relating to personal pension sales, marketing, performance and customer services; that is covered by the FCA.
Consumers have the right to buy products and services with
confidence and have rights when things go wrong. In particular,
they have the right to:
- clear and honest information before they buy;
- get what they pay for;
- be supplied with goods that are fit for purpose and services
that are performed with reasonable care and skill; - have any faults corrected free of charge, or get a refund/
replacement.
What is the Money and Pensions Service?
Its mission is to help individuals to manage their personal finances as well as their circumstances allow. Its aim is to deliver a more streamlined service than the three previous providers by offering people easier access to the
information and guidance they need to help them make effective financial
decisions throughout their lives. The consumer‑facing brand of MaPS is
MoneyHelper.
The FCA (2019) defines an eligible complainant as:
- a private individual, including individuals acting as personal guarantors for loans to businesses they are involved in and consumer buy‑to‑let
consumers; - a business with an annual turnover below £6.5m and fewer than 50 employees, or an annual balance sheet below £5m;
- a charity with an annual income of less than £6.5m when the complaint is
made; - a trustee of a trust that has a net asset value of less than £5m when the
complaint is made; or - a micro‑enterprise that employs fewer than 10 people and has a turnover
or annual balance sheet that does not exceed €2m.
What is the Complaints Handling Procedure?
- Acknowledge - Acknowledge receipt of a complaint promptly, in writing
- Investigate - Ensure complaints are investigated by a person of sufficient competence
who, wherever possible, was not directly involved in the matter under
complaint - Resolve - Aim to resolve complaints promptly, within eight weeks
- Inform - Keep the complainant updated on progress
- Advise - Advise the customer that they can refer the matter to the Financial
Ombudsman Service (FOS – see section 25.4), where a resolution
cannot be found within eight weeks - Provide -Provide the complainant with a final response letter, which must
‘adequately address the subject matter of the complaint’ and notify complainants of their right to approach the FOS within six months of the date of the letter if they are not satisfied
Firms are required to:
- report to the FCA on their complaints‑handling on a six‑monthly basis;
- investigate the root cause of complaints and take action to prevent the
recurrence of similar issues in future.
What is the record keeping for complaints?
Firms have to keep records of all complaints. Records have to be retained for at least three years from the date a complaint
is received.
Where the complaint relates to collective portfolio management
services for a UCITS scheme, the minimum period for which
records must be retained is five years. Where the complaint
relates to MiFID business, records should generally be kept for a minimum of five years and a maximum of seven years (although there are exceptions).
What is the role of the Financial Ombudsman
Service?
A customer who is dissatisfied with the actions of a firm must first complain to
the firm itself, as explained in section 25.3. If the customer is still not satisfied
once the firm’s internal complaints processes have been completed, they can take their complaint to the Financial Ombudsman Service (FOS). Certain types of pension and aspects of pension arrangements are dealt with by the Pensions Ombudsman (see section 25.5).
What are the time limits?
Complaints to the FOS must be made within six months of receiving a final response, six years of the event that gives rise to the complaint, or within
three years of the time when the complainant should have become aware that they had cause for complaint, whichever is the later.
What are the compensation limits?
Limits on the maximum compensation the FOS can award for complaints about
acts or omissions by firms (plus interest and the complainant’s reasonable costs) are set. Different limits apply depending on when the act or omission occurred and when a case is brought to the FOS.
Awards are binding on the firm but not on the complainant, who is free to pursue the matter further in the courts if they wish. The award is not intended
to punish the firm, but to restore the complainant to the financial position in
which they would have been had the event complained about not taken place.
What is The Financial Services Compensation Scheme?
The Financial Services Compensation Scheme (FSCS) provides compensation
for customers who have lost money through the insolvency of an authorised
firm. The PRA and the FCA are jointly responsible for the rule‑making and
oversight of the FSCS and undertake regular reviews of the compensation
framework.
