Quickening pulses

Published by Financial Adviser 19 May 2011

In March last year, the FSA, the Financial Ombudsman Service and the Office of Fair Trading published DP10/1 on consumer complaints (emerging risks and mass claims), a subject that has the potential of sending heart beats racing throughout the industry.

In March this year, the same three bodies published FS11/2, giving feedback on the DP's proposals, which included the creation of a co-ordination committee to scan for emerging risks that is, to identify any risks with the potential to turn into widespread problems, and determine prompt and effective ways of dealing with them, whether through regulatory action or consumer complaints.

The new committee will draw together specialists from the three bodies to spot emerging risks, increasing the ability of the regulators to respond quickly and decisively to threats in the market, and to give the Fos early sight of the issue in handling mass claims.

Feedback included that the primary leer for encouraging fair complaints handling needed to be robust enforcement action.

The three bodies, in their DP recognised that claims management companies can play a role in increasing the speed at which mass claims grow, although the regulators said that claims management companies were generally a symptom of mass claims, not the cause of them.

This is probably an understatement and it will be interesting to see how PPI complaints will now grow from the current 45 per cent workload of the Fos.

The regulators have concluded that the extent to which claims management companies play a role in fuelling mass claims needs to be balanced against the role they can play in improving access to justice for consumers.  Key to this is the value for money that claims management companies offer to consumers when the Fos complaints handling process is free and it intended to be easy to use. The co-ordination committee will replace the current wider implications process.  The new committee has already convened twice.

Philip Ryley is a solicitor and Head of Financial Services & Markets at Michelmores LLP, based in Exeter and London.