The Financial Ombudsman Service (FOS) has proposed a temporary approach to classifying certain complaints with the aim of reducing their backlog of complaints exacerbated during the COVID-19 pandemic. The approach could see companies seeking to proactively resolve complaints by a set deadline before the FOS makes a decision so that the complaint is recorded separately and not as a ‘change in outcome’ (i.e. (say when a complaint has been rejected by a company and supported by FOS). The consultation was open for a short period of two weeks between October 4 and 18, 2021.
FOS order book
The consultation paper notes that the FOS forecast of 145,000 complaints for 2020/21 was eclipsed by actual complaints of 237,000, an increase of over 60%. The FOS attributes the increase over the expected number of complaints as being due to the challenges COVID-19 poses to financial firms.
While the FOS said it closed 99% of the non-PPI complaints that the FOS decided to resolve last year, nearly 90,000 complaints were still awaiting review.
The FOS approach to registering complaints
The FOS publishes data on complaints twice a year, quarterly statistics on complaints and data on complaints of individual financial firms. The data that makes up the latest of these publications identifies the “retention rates” of complaints that FOS receives, recorded against each financial firm. The FOS’s rationale for classifying complaints is as follows:
- A complaint is recorded as having a “change in outcome” if the complaint is resolved by the FOS, in particular, with a more favorable outcome for the client. Usually, when it has been rejected by the company and confirmed to the FOS: or
- Complaints are considered and recorded as “no change in outcome” if the complaint is resolved with the FOS in accordance with the financial firm’s initial assessment of a remedy, or if it simply refuses to uphold the complaint.
The retention rate is therefore calculated using the percentage of complaints received that are recorded as having a change in outcome by the FOS as part of this assessment.
The FOS believes that this publicly available information increases transparency, helps inform consumer choice and inspires companies to improve the handling of complaints.
The consultation proposes a temporary modification of this approach. The idea being, to encourage companies to take a proactive stance on the resolution of complaints, by granting companies a temporary stay on any negative registration for the resolution of a complaint.
This will be achieved by recording the outcome of each complaint as neither a “change in outcome” nor a “no change in outcome”, but as a separate category. The change in the data logging approach will also allow financial companies to better understand the FOS approach. The document states that FOS will assist companies with their review by providing context on the open stock of FOS complaints, including, for example, providing product-specific hold rates and advice on areas of complaint that FOS would be likely to defend.
The option to actively resolve complaints would be available provided there is no FOS decision. Instead of the complaint being assigned to a case manager for investigation as part of the usual process, the new system would mean that existing pending complaints are isolated and set aside to allow financial firms to assess their stock of complaints. The companies would then be able to settle the complaints, by informing the FOS of this intention and the FOS would then communicate it to the consumer.
The FOS indicates that there are certain situations where this approach may not work. Specifically, in cases where there is a vulnerable person involved where the FOS does not want the resolution of complaints to be further delayed and therefore reserves the right, in such cases, to proceed with the investigation of any complaint even whether it falls within the scope of the proposal. FOS also asked stakeholders about how FOS treats offers made by financial firms when they have not looked into the complaint, as FOS would not be able to say whether the offer is “fair”. . The consultation document says that in circumstances where offers are made that FOS cannot assess, it will say that it cannot confirm whether the offer is a fair offer or not.
The device is only expected to last temporarily and it is proposed to stop at the end of the fiscal year (i.e. in March 2022).
Attractive or not?
The recognition by the FOS of the backlog it faces is to be welcomed; the fact that complaints are blocked at the FOS often for years is clearly unsatisfactory for complainants as well as for companies.
FOS clearly hopes that the proposal to register resolved complaints under a different category will encourage companies to proactively resolve complaints within the proposed window. Whether this turns out to be the case remains to be seen; given that complaints will always be recorded in FOS data and therefore likely identifiable as a settled complaint seems to offer little or no carrot to companies anyway.
That said, FOS’s offering to share retention rates on certain product types may be of more general help and if FOS is willing to share additional data against which companies can consider proactively addressing issues. complaints, this may be more compelling for companies looking to alleviate their own complaints.
A final decision on the consultation will be presented by November 1, 2021. So not long to wait.