The Treasury is to examine the role of the Financial Ombudsman Service (FOS) amid concerns about its remit in areas such as motor finance claims, as part of plans for a bonfire of regulations, while the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) are among a group of regulators summoned to meet Rachel Reeves on March 17, as the Chancellor announces an action plan “to deliver on the pledge to cut the administrative cost of regulation on business by a quarter”.
The Treasury say it will be exploring ways to streamline the PRA’s and FCA’s “have regards”, to identify opportunities to rationalise them, and that its review of FOS is designed “to ensure that it is acting as an impartial service that provides quick and predictable resolutions to disputes – not as a quasi-regulator.”
The Economic Secretary to the Treasury has been asked to examine whether the FOS, as it stands today, is delivering its role as a simple, impartial dispute resolution service which quickly and effectively deals with complaints against financial services firms and which works in concert with the FCA.
The Economic Secretary will focus, in particular, on a range of points that have been raised as part of the Treasury consultation on the growth and competitiveness strategy. This will include addressing concerns around:
- The framework in which the FOS operates which has resulted in it acting, at times, as a quasi-regulator.
- Whether the FOS is applying today’s standards to actions that have taken place in the past.
- The practices that have grown up over time on compensation.
The Treasury said this work is expected to conclude by the summer, with new legislation in prospect if needed.
David Postings, Chief Executive of UK Finance, said: “We need a regulatory environment that supports investment and is internationally competitive.
“Today’s announcement builds on that progress, most notably reviewing how the FOS operates. It currently acts as a quasi-regulator, which was not the original intention, and addressing this issue is a key one for our sector.”
Action Plan
The Treasury said the action plan is intended to save businesses across the country billions of pounds by cutting the number of regulators, streamlining their core legal duties and cracking down on complexity in the regulatory system.
Regulators will be summoned for performance reviews twice a year from the relevant Secretary of State and will be judged against a set of targets agreed with the businesses they affect, which could determine how quickly they make decisions on new licenses for businesses and products. The regulators – including both the FCA and PRA – will immediately begin discussing these targets with businesses and publish them by June.
Major regulators will also have their legal duties slimmed down, so that they do not waste time satisfying redundant duties that do not align with their core purpose or the public’s priorities. This work will begin with the financial services regulators, and will also include energy watchdog Ofgem, water regulator Ofwat and the Office for Road and Rail in the first phase.
In addition, the action plan states that “where businesses and regulators agree there is a case to expedite decisions and authorisations, we will work with regulators to identify process improvements including the introduction of paid-for ‘fast lanes’ for regulatory approvals.”
As previously announced, the Treasury will work with the regulators, the Office for Investment and the City of London Corporation to establish a “concierge service” that enhances the attractiveness of the UK as a destination for global financial services, by making it easier for firms to navigate the UK regulatory landscape and broader barriers to entry.
This is also to be a package of measures to enable the FCA to support early-stage innovative firms to start conducting regulated activities, including more dedicated support, issuing “minded to approve” notices to support fundraising, and considering whether the legislative framework can be updated to allow relevant firms to conduct limited regulated activities with streamlined conditions.
Commenting on the Chancellor’s statement today, Stephen Haddrill, Director General of the FLA said: “We welcome the Chancellor’s statement.
“The current situation in the consumer credit sector is that firms spend millions of pounds complying with Financial Conduct Authority rules, only to fall foul of the Financial Ombudsman Service’s reinterpretation of those rules. Managing risk in this sector is expensive, time consuming and subject to massive uncertainty, which Claims Management Companies can then exploit, undermining the investability of the market.
“The dynamic in the UK regulatory landscape does not work for lenders or customers and does not adequately support growth. We want one clear set of rules that firms follow, and that the FOS adheres to when adjudicating cases.”
