The roles and responsibilities of the Financial Ombudsman Service, Financial Services Authority and the Office of Fair Trading
The Financial Ombudsman Service (FOS) formerly The Banking Ombudsman.
The Financial Ombudsman Service is a statutory, informal dispute resolution service, established under FSMA but independent from the FSA. It operates as an alternative to the civil courts. Its role is to resolve disputes between individuals or small businesses and financial firms quickly and with minimum formality on the basis of what is fair and reasonable in the circumstances of each case.
In considering what is fair and reasonable, The Financial Ombudsman Service will take into account the relevant law, regulations, regulators’ rules and guidance and standards, relevant codes of practice (such as the Banking Code), and good industry practice at the relevant time.
The Financial Ombudsman Service has three jurisdictions, covering nearly all financial services business:
• Compulsory jurisdiction
This applies to financial services firms authorised by the FSA, and covers consumer
complaints about FSA-regulated activities, consumer credit activities and certain
other specified activities.
• Consumer credit jurisdiction
The Consumer Credit Act 2006 created the consumer credit jurisdiction. This
covers consumer credit complaints against any businesses with standard licences
from the OFT not authorised by the FSA. If the licensee is also authorised by the
FSA, its consumer credit complaints are covered by the compulsory jurisdiction.
• Voluntary jurisdiction
This applies voluntarily to financial businesses and activities that are not covered by
the compulsory jurisdiction or the consumer credit jurisdiction. It covers consumer
complaints about certain of these businesses’ financial activities, for example
National Savings & Investments.
The FSA has statutory oversight of The Financial Ombudsman Service and appoints its Chairman and directors, but the FOS is operationally independent. This has allowed it to take on wider jurisdictions that cover businesses which are not FSA-regulated.
The Financial Ombudsman Service decisions, if accepted by the complainant, are binding on respondent businesses and it can make awards of up to £100,000. The service is free to consumers. The Financial Ombudsman service is funded by the financial institutions which it administers complaints against. Complaints can be administered providing the complaints process with the financial institution has been followed
The Financial Services Authority (FSA)
The FSA is the UK’s primary financial regulator. It aims to promote efficient, orderly and fair financial markets, to help retail consumers achieve a fair deal and to improve its business capability and effectiveness.
The Financial Services and Markets Act 2000 (FSMA) gives the FSA four statutory
objectives:
• maintaining market confidence in the UK financial system;
• promoting public understanding of the financial system;
• securing the appropriate degree of protection for consumers; and
• helping reduce financial crime.
The FSA is answerable, through the Treasury, to Parliament for the effective discharge of its functions.
Within the scope of FSMA, the FSA is responsible for the authorisation and prudential supervision of financial services firms, including banks, building societies, investment firms, insurance companies and brokers, credit unions and friendly societies. The FSA also applies conduct of business regulation for the mortgage, insurance and investment mediation activities of these firms.
The roles and responsibilities of the Financial Services Authority and the Office of Fair Trading
The Office of Fair Trading (OFT)
The OFT is the UK’s independent consumer and competition authority. It has a broad remit covering the whole of the UK economy, including some aspects of financial services. The OFT has many different legal powers that enable it to carry out its mission to make markets work well for consumers. Its regulatory powers are limited to the operation of the consumer credit and merger control regimes, which are statutory functions.
The OFT is a non-ministerial government department established by statute and accountable to Parliament. The OFT’s aim is for competitive, efficient and innovative markets where standards of consumer care are high, consumers have choice and are confident about making choices, and where businesses comply with consumer and competition laws but are not overburdened by government regulations or restricted and harmed by market abuse.
The OFT’s work includes analysing and studying markets, enforcing competition and consumer law, approving codes of practice (through its Consumer Codes Approval Scheme) and working with partners to deliver relevant education programmes to businesses and consumers.
Unfair Contract Terms
Both the FSA and the OFT have powers in relation to unfair contract terms under
the Unfair Terms in Consumer Contracts Regulations 1999. The OFT is the lead
enforcer under the Regulations. The FSA is one of a number of qualifying bodies
which means that it may also exercise powers under the Regulations.
Broadly, the FSA will consider the fairness of standard terms in financial
services contracts issued by FSA-authorised firms (or their appointed
representatives) for FSA-regulated activities. The OFT will consider the fairness
of standard terms in all other financial services contracts. Further detail can be
found in the Concordat at http://www.fsa.gov.uk/pubs/other/concordat_fsa_oft.pdf.
Dealing with complaints
14. Neither the FSA nor the OFT can compensate individual consumers or assist individuals with their complaints. That is the role of the firm in the first instance.
The Financial Ombudsman originally the Banking Ombudsman is the UK’s statutory dispute resolution scheme, established under FSMA, providing an independent service for resolving individual consumers complaints about firms’ provision of (or failure to provide) a financial service.
The Financial Ombudsman Service is not a regulator and FSMA makes it clear that the FOS is operationally independent of the FSA.
The Financial mediator
The Financial Ombudsman Service is a statutory, informal dispute resolution service, established under FSMA but independent from the FSA. It operates as an alternative to the civil courts. Its role is to resolve disputes between individuals or small businesses and financial firms quickly and with minimum formality on the basis of what is fair and reasonable in the circumstances of each case. The Ombudsman function in a financial sense is essentially a mediation service which ensures any one with an issue or misunderstanding regarding matters of money is treated to free, impartial advice from a totally independent source.
The Ombudsman Services has three jurisdictions covering the vast majority of the financial services industry: These jurisdictions comprise of: Compulsory jurisdiction - (this applies to financial services firms authorised by the FSA and handles complaints about FSA regulated activities and consumer credit activities) Consumer credit jurisdiction - (this covers consumer credit complaints against any businesses with standard licences from the OFT not authorised by the FSA. It covers complaints arising from certain activities within a financial institution) and Voluntary jurisdiction - (This applies voluntarily to financial businesses and services that are not covered by the compulsory or consumer credit jurisdiction.)
The FSA has statutory oversight of The Financial Ombudsman Service and appoints its Chairman and directors, but the FOS is operationally independent. This has allowed it to take on wider jurisdictions that cover businesses which are not FSA-regulated.
Service decisions and the FSA
The Financial Ombudsman Service decisions, if accepted by the complainant, are binding on respondent businesses and it can make awards of up to £100,000. The service is free to consumers. The Ombudsman service is funded by the financial institutions which it administers complaints against. Complaints can be administered providing the complaints process with the financial institution has been followed. The UK's official financial regulator is the Financial Services Authority (FSA).
It aims to promote and maintain efficient, orderly and fair financial markets in order to ensure consumers achieve a fair deal in their financial affairs. The Financial Services and Markets Act 2000 (FSMA) gives the FSA four statutory objectives: Maintaining market confidence in the UK financial system; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and helping reduce financial crime.
Within the scope of the FSMA, the FSA is responsible for the authorisation and overseeing supervision of all financial institutions, the Financial Ombudsman service is the public's conduit to this function. Firms and businesses under the scope of the FSA include but are not limited to: Banks, Building Societies, investment firms, insurance companies and brokers, credit unions and friendly societies. The FSA also oversees codes of conduct regarding regulation for the mortgage, insurance and investment mediation activities of the aforementioned sectors.
The Office of Fair Trading
The OFT is the UK's independent consumer and competition authority. It has a broad remit covering the whole of the UK economy, including some aspects of financial services. The OFT has many different legal powers that enable it to carry out its mission to make markets work well for consumers. Its regulatory powers are limited to the operation of the consumer credit and merger control regimes, which are statutory functions. The Financial Ombudsman services compliments and exists in conjunction with the OFT, whilst there are maybe no official connection between the two entities their objectives are essentially the same, to ensure the consumer is treated fairly. The OFT is a non ministerial government department established by statute and accountable to parliament, their main aim is achieve and maintain competitive, efficient and innovative markets where standards of consumer care are high.
Another important function of OFT is to ensure that businesses comply with consumer and competition laws but also to see that the companies are not drowning in a sea of red tape and are aware of the functions and responsibilities of the Financial Ombudsman. Neither the FSA nor the OFT can compensate individual consumers, their function is to assist and facilitate the means for the complaint in order to reclaim/settle any financial matters with the company in question.
