Call for FCA and FOS to co-operate and end uncertainty

The Chancellor has announced a review of how the Financial Ombudsman Service (FOS) and the Financial Conduct Authority (FCA) can work together to ensure better outcomes for the lending industry as well as for consumers, citing concerns about the fall-out from the apparent conflict in how the two bodies have handled historic claims of unfair practice and large-scale compensation schemes.

The bid to improve the relationship between the regulator and ombudsman formed part of Rachel Reeves’ first Mansion House speech, where she acknowledged she had “heard from many of you that our approach to redress can cause uncertainty and be a drag on investment.”

The auto finance industry has been thrown into turmoil after FOS decisions in several cases involving car finance agreements appeared to ignore the FCA regulations in place at the time the arrangements were made, and opened the way for a slew of compensation claims.

New FOS rules

“So we have worked closely with the FCA and the Ombudsman to develop a new agreement between the two institutions, with clearer expectations on how they cooperate, including on historic market practice and mass redress events.”

Reeves said both organisations will be publishing a joint Call for Input “which seeks to significantly improve the rules governing how FOS operates.”

Rebalance

Speaking to senior figures from across the financial services sector, Rachel Reeves highlighted that since the 2008 banking crisis, “the UK has been regulating for risk, but not regulating for growth”. As a result, Reeves said, “these changes have resulted in a system which sought to eliminate risk taking that has gone too far and, in places, it has had unintended consequences.”

“So while maintaining important consumer protections, upholding international standards of regulation, and protecting the vital stability of our financial services system, now is also the moment to rebalance our approach and take forward the next stage of reforms needed to drive growth, competitiveness and investment,” she said.

The FCA, along with the Prudential Regulation Committee, the Monetary Policy Committee, the Financial Policy Committee and the Payment Systems Regulator, have been issued with new  growth-focused remit letters, in a bid to ensure regulators’ focus is aligned.

Transformational change

Early in the speech, Reeves conceded that “some of our regulatory requirements are duplicative, and they could be streamlined”, which she said would free up resources for businesses to innovate and to grow.

As well as an ongoing FCA Handbook Review, Reeves said the FCA will shortly consult on “transformational changes to financial advice and guidance, to ensure that people get the right support”, noting that while regulation has been successful in improving the quality of financial advice being offered to consumers, many people do not get the help with their finances that they want and need.

Next spring, the government will publish what Reeves called “the first ever Financial Services Growth and Competitiveness Strategy”, which she said would be designed to give the financial services sector the confidence it needs to invest.

Reaction

“Certainty, clarity and predictability must be the watchwords of financial services regulation for businesses to thrive, for consumers to be protected, and for growth to be realised. The activity of claims management companies, which has choked the complaints system with baseless claims, should also be curtailed.”   

“At next week’s conference AFC will ask Isak Bengtzboe, chief policy adviser at Leaseurope as well Stephen Haddrill from the FLA how they believe the trade associations can play their role in making regulation work better and more effectively. The industry and not just the regulator has a vital role to play in making this partnership work.”

For more details and to book your place visit the AFC conference website or email Louise Clavey at louiseclavey@assetfinanceconnect.com