Seven financial services trade bodies are writing a joint letter to Treasury financial secretary Mark Hoban calling for the powers of the Financial Ombudsman Service to be curbed within the new regulatory structure.
The letter, a late draft of which has been seen by Money Marketing, is set to be signed by the Association of British Insurers, Aifa, the British Bankers’ Association, the Building Societies Association, the Council of Mortgage Lenders, the Association of Financial Mutuals and the UK Cards Association.
The seven believe current rules allow the FOS to go beyond its core function and take on roles that should be carried out by regulators, industry initiatives and market competition. The letter calls for the role of the FOS within the new regulatory architecture to be clearly defined in statute to provide greater clarity that firms will not be hit by retrospective interpretations of the rules.
It suggests the FOS should be removed from the process of determining issues with wider implications, which it carries out in conjunction with the FSA and the Office of Fair Trading.
The trade bodies believe the FOS should not have the right to prevent firms from seeking resolutions of test cases in court, as is the case in certain circumstances, and want regular reviews of the FOS’s overall operations, polices and procedures, alongside the planned National Audit Office audits. They also want the FOS to have to consult with stakeholders before issuing policy notes or guidance.
The letter suggests regulation of claim management comp- anies could be moved from the Ministry of Justice to the FCA remit to strengthen regulation.
An FOS spokesman says: “Our role is set out in statute and our relationship with the regulator underpinned by law. The wider-implication process has been enhanced with a coordination committee and the procedures under which a test case can be carried out is set out in law.”
Thameside Wealth director Tom Kean says: “For so many people to feel so negative towards them tells you something. We want a professional arbiter but they seem to have become a law unto themselves in our dealings with them over the years.”
The proposals of the seven trade bodies:
- The FOS’s role and relationship with the Financial Conduct Authority to be clearly set out in statute to give firms confidence that if they comply with FCA regulations they will not face retrospective interpretations of the rules;
- For the FOS to be removed from the process of determining regulatory issues with wider implications to stop the ombudsman straying into regulatory functions;
- For consideration to be given to claim management companies being regulated by the FCA rather than the Ministry of Justice and to CMCs contributing to funding the ombudsman;
- For the FOS’s right to prevent firms taking test cases to court when important or novel points of law are in evidence to be removed;
- For the FCA to undertake regular reviews of the FOS’s operations, policies and procedures but not compromise the ombudsman’s operational independence;
- That the FOS be required to consult with stakeholders before issuing policy notes or guidance.