The FSA has set out its proposals for handling super-complaints brought by consumer bodies and reports of regulatory failings by firms and the Financial Ombudsman Service.
The regulator published a guidance consultation yesterday on how the new regulator the Financial Conduct Authority will handle super-complaints and references. Super-complaints can be brought by designated consumer bodies which allege that particular parts or features of the financial services market are significantly damaging the interests of consumers. Similarly, firms and the FOS can make references to the FCA under section 234D of the Financial Services Act 2012 alleging there has been a failure by a regulated firm which is leading to consumer detriment.
The guidance outlines the evidence needed to support super-complaints and references, and how these will be handled by the FCA.
Super-complaints need to relate to the UK financial services market. Cross-border issues affecting consumers in the UK or involve UK firms will be in scope, but not issues solely affecting consumers in overseas jurisdictions.
Consumer bodies bringing super-complaints will need to include details about how a particular part of the market is damaging consumer interests, setting out the extent of any damage, how this has been calculated, and what outcome the consumer body wants to see as a result of the super-complaint.
They will need to back up their claims with documented facts and evidence on practices such as high-pressure sales tactics, exit or switching costs, whether the relevant product or service is only available as part of a package of products or services, and whether claims would be covered by the FOS and the Financial Services Compensation Scheme.
When firms or the FOS wish to make a reference to the FCA they will need to establish a regulated person or persons has demonstrated a “regular failure” to comply with regulatory requirements. For the reference to be considered the regular failure needs have resulted in a consumer loss which would be remedied in the courts if the client brought legal proceedings or result in an upheld FOS complaint.
The FCA will be required to respond to a super-complaint or reference within 90 days setting out how it proposes to deal with the allegations and what action, if any, it has decided to take. Before it decides on further action the FCA may carry out wider enquiries such as internal research, public requests for information, and may carry out thematic work.
Possible outcomes include enforcement action, initiating a consumer redress scheme, and reviewing relevant rules or guidance.
The FCA has the power to dismiss super-complaints or decline to respond to references where they are “unfounded, frivolous or vexatious”.
The FSA says it is up to consumer bodies, firms and the FOS to decide whether to publicise whether a super-complaint or reference has been made. But the FSA says complainants should consult with the FCA “to avoid jeopardising investigations that could be hampered by public disclosure”.
The consultation closes on 18 March.