The Financial Conduct Authority (FCA) should be doing more to prevent huge numbers of complaints from ending up at the Financial Ombudsman Service (FOS), Richard Lloyd said while addressing the Treasury select committee yesterday evening, following his review of the FOS.
Lloyd further stated that the ombudsman had been “completely distorted” by the massive number of payment protection insurance (PPI) complaints it has had to handle in recent years, and that the regulator should have forced firms to solve their clients’ problems.
Lloyd, the former executive director of Which, said: “The FCA has the power to say to a regulated firm 'you have poorly treated, mis-sold, failed this large number of customers, this is what you need to do to put that right', a mandatory redress scheme.
“That's, in my view, what should have been done with PPI. In the end the FOS has ended up clearing up this mass mis-selling problem in a way that has completely distorted the organisation for a decade.
“What I would rather see is the regulator imposing redress schemes on firms that have harmed or caused consumer detriment in a large scale rather than to say to consumers 'it's up to you, you have got to raise a complaint and when that complaint has not been handled properly, you've got to go to the FOS and spend a few years of your life'.
“What has been missing in the debate about the FOS is that there is a bigger, more effective in my view, way of tackling these kinds of systemic or widespread consumer harms earlier which is for the FCA to use that power better to force the firm to put things right in the first place, proactively contacting its customers saying this is what they'll do to put it right, rather than to wait for the individual complaints to work through the system and potentially to end up at a FOS that has then got to scramble to work out what its position would be on TSB IT failures for example.”
When Treasury select committee member Rushanara Ali asked the former director of Which whether the responsibility of solving the mass mis-selling issues was being handed to FOS, he responded: “Precisely.”
Subscribe to our newsletter to receive breaking news by email.