topic 25 - consumer rights, complaints & compensation

Question 1

Key consumer rights

Answer 1

• 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

Question 2

Consumer Rights Act 2015

Answer 2

• Aims to reduce no. of disputes and those going to court, speed up dispute process, reduce dispute resolution costs
• Gives consumers enhanced and easier to understand rights that change the rules applying when things go wrong in relation to goods and services
• Does not cover compensation limits for successful claims

Question 3

Alternative dispute resolution

Answer 3

• Mediation – agreement facilitated between parties
• Arbitration – decisions cannot be appealed through courts
• Adjudication – decisions can be appealed through courts

Question 4

FCA eligibility rules for compensation

Answer 4

• A private individual – including individuals acting as personal guarantors for loans to businesses they are involved in and consumer BTL consumers
• A business – with an annual turnover below £6.5m and fewer than 50 employees
• A charity – with an annual income below £6.5m
• A trustee – of a trust that has a net asset value of less than £5m
• A micro-enterprise – that employs fewer than 10 people and has a turnover of less than £2m

Question 5

Record-keeping for all complaints

Answer 5

• Have to be retained for at least 3 years from the date a complaint is received
• 5 years minimum - where the complaint relates to collective portfolio management services for a UCITS scheme
• 5 years minimum and 7 years maximum – where the complaint relates to MiFID business

Question 6

Super-complaints

Answer 6

• FSMA gives designated consumer bodies the right to make a super-complaint to the FCA
• Under the Financial Services Act 2012 – designated consumer bodies, regulated persons and the FOS can make a super-compliant
• The FCA is required to respond to a super-complaint within 90 days

Question 7

Role of the Pensions Ombudsman Service (POS)

Answer 7

• Deals with complaints and disputes relating to the running of personal and occupational pension schemes, also with complaints about PPF
• Must relate to cases of maladministration, and need to show that this has led to injustice
• Does not deal with complaints about the sales and marketing of pension schemes – dealt with by the FOS

Question 8

The Financial Services Compensation Scheme (FSCS)

Answer 8

• Provides compensation for customers who have lost money through the insolvency of an authorised firm
• The PRA and FCA are jointly responsible
• Funded by levies on firms authorised by the FCA and PRA

Question 9

What is the maximum permissible compensation payable by the FSCS for a term assurance policy that provides £100,000 cover over a 20 year term?

Answer 9

100% - no upper limit

Question 10

Which organisation is responsible for dealing with complaints relating to the sale of pension products?

Answer 10

• The Financial Ombudsman Services.
• The Pensions Ombudsman Service only deals with complaints relating to the running (ie administration) of personal and occupational pension schemes. The Money and Pensions Service does not get involved in pension complaints.
• The Financial Services Compensation Scheme deals with compensation for customers who have lost money through the insolvency of an authorised firm

Question 11

In situations where alternative dispute resolution is being used, which of the following options allows for appeal through the courts?

Answer 11

Adjudication

Question 12

Which of the following would not be classed as an eligible complainant according to the FCA’s definition?

Answer 12

Trustee of a trust that has a net asset value of less than £6.5m when the complaint is made.

Question 13

For how long must records of complaints involving MiFID business be retained by the firm?

Answer 13

Five years.

Question 14

Within what time limits must a complaint be made to the Financial Ombudsman Service?

Answer 14

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.

Question 15

Which of the following is a step that must be carried out when a firm receives a complaint, if it cannot be resolved within three working days?

Answer 15

Ensure the complaint is investigated by a person of sufficient competence, who, where possible, is not someone directly involved in the matter under complaint

Question 16

In summary, in what circumstances is a contract or notice deemed to be unfair?

Answer 16

A contract or notice is deemed to be unfair if it causes a significant imbalance in the rights and obligations of the various parties to the contract to the detriment of the consumer

Question 17

Once a firm has completed its procedures for resolving a complaint, it must always issue the complainant with a final response letter. True or false?

Answer 17

False. For complaints that are resolved by close of business on the third working day following receipt, the firm must provide a summary resolution communication to the complainant, advising them of their right to refer the matter to the FOS should they remain dissatisfied with the firm’s response