The Finance & Leasing Association (FLA) has responded to the call for input on modernising the redress system, highlighting concerns about the Financial Ombudsman Service (FOS).
The FLA stated that the FOS had strayed from its original purpose as an alternative dispute resolution body set by Parliament.
While it still aims to resolve individual complaints, the FOS now adjudicates based on what it considers ‘fair and reasonable in all circumstances of the case’.
This approach allows the FOS to reinterpret the Financial Conduct Authority’s (FCA) rules, disregarding the original intent and compliance methods of firms.
The FOS determines what it believes should have occurred and holds firms accountable to that standard.
The FLA said that this led to firms complying with FCA rules still finding themselves involved in large-scale redress events, creating regulatory uncertainty, encourages claims management company activity, increases market risks, and raises finance costs for customers, ultimately harming economic growth.
Moreover, the FOS has established precedent-setting decisions over time, requiring firms to adopt new measures without proper cost considerations.
Stephen Haddrill, director general of the FLA, said: “We should not have to point this out, but at a bare minimum, FOS and firms must use the same rulebook.
“Anything else is unacceptable and an open invitation to further CMC activity, increased costs and continuing uncertainty.
Haddrill added: “The necessary changes to improve how the Financial Ombudsman Service operates will not be achieved by tinkering at the edges of FOS’s remit and approach, but by fundamentally reviewing its role in the regulatory architecture.”
