Alternative Disputes Resolution – The Financial Ombudsman

Treating Customer Fairly or TCF is the central tenet of the FCA regulatory principles. A key indicator of whether a firm is treating customers fairly is how it handles complaints. It is important therefore that firms fully understand their obligations.

From time to time customers will have cause to complain about a financial product they have bought. Firms should make their complaints handling policy clear at point of sale and provide customers with easy and accessible ways to raise a complaint.

Ideally firms should aim to resolve the complaint with the customer immediately. Customer complaints that cannot be resolved within one business day must be acknowledged in writing to the customer. This must be done promptly. The firm then has up to eight weeks to investigate the complaint, to make a decision and to issue a final written response to the customer. That response must advise the customer of their right to take the complaint to the Financial Ombudsman if they are dissatisfied with the outcome.

This process is called Alternative Disputes Resolution. The customer generally has 6 months from the date of the firm’s final written response to decide whether or not to refer the matter to FOS for adjudication. If the customer decides to refer the complaint to FOS, the firm must cooperate with the Ombudsman in investigating the complaint. FOS will request that certain information is provided by the firm usually with a deadline date.

Once referred to FOS most cases take up to 6 months to be resolved, occasionally longer than this. Both parties are given the opportunity to make representations and in extreme cases the Ombudsman may request a formal hearing. The Ombudsman considers cases on the basis of what is “fair and reasonable” and this may go beyond strict legal liability.

Once the case is decided an initial determination will be issued by a FOS adjudicator. Either party has the right appeal against this decision. In such an event the case is referred to an Ombudsman for final determination. Once accepted by the complainant the firm is bound by this determination.

Complaints handling is a critical area for firms. The right systems and processes need to be in place to handle complaints properly. It is important to record customer complaints and all contacts with the customer. In the event of complaints being referred the firm is then in a strong position to provide the required information and has a greater chance of defending their decisions.

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