The UK Financial Conduct Authority (FCA) and the Financial Ombudsman Service have published a joint consultation on modernising the financial redress system, aiming to prevent high volumes of complaints on specific or novel issues from overwhelming the system and delaying consumer compensation. The proposals focus on earlier issue identification and more consistent outcomes, including improved FCA and Financial Ombudsman coordination on regulatory interpretation through a new referral process, and a lead complaint process to address novel and significant issues as they emerge. Measures also include clearer guidance and good practice examples for firms on escalating issues to the FCA sooner, industry guidelines to help assess when an issue has wider implications that could drive complaint spikes, and changes to the Financial Ombudsman’s intake process so complaints are better evidenced and ready before an investigation starts. In addition, the Financial Ombudsman has confirmed it will change the interest rate applied to some awards from 8% to the Bank of England base (average) rate plus 1%, while continuing to base awards on consumers’ actual losses. The package is intended to complement a parallel government consultation on the Financial Ombudsman framework, including potential changes to the ‘fair and reasonable’ test, greater FCA flexibility to manage mass redress events, new routes for referring ambiguous rule interpretation to the FCA, and an absolute 10-year time limit for bringing cases to the Financial Ombudsman (subject to exceptions). The Financial Ombudsman also plans to consult later this summer on introducing different levels of case fees for firms depending on the circumstances of a complaint.

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