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Complaint Handling Update

  • United Kingdom
  • Financial services disputes and investigations
  • Litigation and dispute management


New dispute resolution service for SMEs

In our last Complaint Handing Update, we set out information on a new independent organisation known as The Business Banking Resolution Service (BBRS) which has been set up to resolve disputes between businesses and their banks for free.  Since then, the BBRS has made two key senior personnel appointments:

  • Samantha Barrass, former Chief Executive of the Gibraltar Financial Services Commission and former director of the Solicitors Regulation Authority, has been appointed as the first Chief Executive Officer; and
  • Alexandra Marks, a deputy High Court Judge and expert in dispute resolution, has been appointed as Chief Adjudicator.

The BBRS is in the final stages of setting up the necessary operations to function and whilst the pilot is not yet live, a number of businesses have registered their interest in being involved.  Cases are being selected and businesses are expected to be contacted by the BBRS in a phased approach in early 2020.  Critically, the BBRS has confirmed that for the purposes of the pilot, it will not consider cases with high complexity or involving insolvency issues.  This is in addition to its earlier confirmation that it will not consider complaints which have already been considered by an independent review process, or are being pursued through the court process. 

There had been a lot of criticism from representatives for businesses regarding the eligibility criteria for complaints, but this appears to have gone quiet for the time being whilst the outcome of the first cases under the pilot is awaited.  Whilst the BBRS has said that it would not consider complaints subject to live court proceedings, there has been mounting pressure for banks to stay legal action against SMEs until the BBRS has had chance to consider their cases. Where banks do choose to stay proceedings, we expect it to be a on a case by case basis, rather than a wide-spread policy and whether the BBRS will accept such cases remains to be seen.

FOS: 2020/21 plans, budget and future strategy

In our last Complaint Handling Update, we also reported on FOS’s consultation on its future funding.  FOS has recently published its 2020/21 Plans and Budget and Future Strategy.  From April 2020, FOS proposes that:

  • 60% of income should come from case fees and 40% from the levy (with an aspiration to reach a 50:50 split in the future). Presently 85% of FOS’s funding comes from the case fee and 15% from the levy.
  • The individual case fee will be increased to £650 (up from £550).  This will apply to all cases closed after 1 April 2020, regardless of when the case was referred to FOS.
  • Businesses outside of the group account fee arrangement will not be charged for the first 10 complaints received (currently such businesses are not charged for the first 25 complaints).
  • Businesses in the group account fee arrangement will not be charged for the first 50 complaints received (currently such businesses are not charged for the first 125 complaints).
  • A minimum of 6 months’ operating expenditure to be maintained (increased from 3 months).

The consultation closed on 31 January 2020.  FOS intends to publish its final plans and budget by 31 March 2020.

The proposals have been met with some criticism.  There is a feeling that the proposals seek to spread the cost of FOS across all financial service providers and that firms will end up paying more irrespective of the number of complaints they have received.  The increased case fee will catch the flood of PPI complaints which are expected in the second half of 2020 and FOS is set to gain from this. As the increased fee is retrospective in that it catches all cases closed after 1 April 2020, many firms may also be at a financial disadvantage through no fault of their own if FOS does not deal with a complaint efficiently before 1 April 2020.  Further, the increased costs to firms does not necessarily sit well against the backdrop of FOS saying that it needs to adapt for a smaller world post PPI with fewer complaints.  It remains to be seen whether FOS will change its stance following the consultation but we would consider this unlikely – FOS has made clear that it is facing uncertain and volatile times and that these proposals are necessary to safeguard against those. 

FOS has also set out the key complaints trends and issues as it sees them:

  • FOS is aware that firms are working through millions of PPI complaints submitted by the FCA’s deadline of 29 August 2019.  FOS forecasts that it will unlikely see these complaints until the second half of 2020/21 as many firms have indicated that they will not be able to provide a final response until summer 2020.
  • FOS has seen a 40% increase in complaints about frauds and scams which can be particularly challenging and complex.
  • Excluding PPI, complaints about consumer credit account for one in every three complaints.  The area is wide-ranging (from payday and guarantor loans to car finance and catalogue shopping) but affordability and persistent debt are consistent themes.  
  • FOS has seen fewer complaints relating to insurance and investments and pensions, but has seen a rise in complaints about SIPPs (self-invested personal pensions), including disputes over due diligence.  FOS currently upholds about 6 in 10 complaints involving SIPPs (a rate far higher than the average across its other casework).
  • Since April 2019, FOS has been able to help businesses with an annual turnover of less than £6.5m, and either a balance sheet total of less than £5m or fewer than 50 employees.  From April 2019 to October 2019, FOS received complaints from 113 businesses (49 of which could be investigated because they related to events after 1 April 2019).  Some of the themes to have emerged include fraud and scams, commercial insurance and account closures.
  • From April 2019 to October 2019, FOS has received more than 500 complaints about CMCs.  Most involve complaints about the quality of the CMC’s customer service, how they’ve handled claims or complaints about fees.  A small proportion relate to delay.

FOS is facing a period of change but it will still have to deal with PPI for some time.  Generally, complaints are becoming more complex and hard-fought, meaning that FOS is having to rapidly up-skill in a number of areas.  This is adding a layer of difficulty given one of the fundamental reasons why a complainant may refer a complaint to FOS is for a quick resolution and such issues frustrate this objective.  How FOS reacts and adapts to its changing world will be key for those involved in complaints and it is questionable as to whether there will be bigger changes ahead in the future.

FCA takes action against two CMCs

Since the FCA has taken over the functions of the Claims Management Regulator (CMR) (the former regulator for CMCs), it has made clear that all firms (including CMCs) must conduct business with integrity and due care, skill, and diligence and that action will be taken against non-compliant CMCs.  In recent months, there has been action against two CMCs sending a very clear that the FCA is not afraid to take action where justified.  We expect to see a significant increase in FCA enforcement action against CMCs in 2020.  This will be welcome news to financial firms.

Hall and Hanley Limited (Hall and Hanley)

The First-tier Tribunal upheld a fine of £91,000 imposed on Hall and Hanley (whose business focussed on claims for mis-sold PPI) by the CMR for data breaches and unauthorised copying of client signatures – a matter so serious that a financial penalty was justified.  Hall and Hanley had appealed to the First Tribunal but were unsuccessful. Hall and Hanley has since entered voluntary winding up.

Professional Personal Claims Limited (PPC)

Following an initial investigation and finding by the CMR, the FCA also fined PPC £70,000 for misleading consumers through its websites and printed materials.  PPC’s websites and printed materials prominently used the logos of major banks which the FCA considered was liable to mislead consumers into believing that they were corresponding directly with their banks for mis-sold PPI, rather than engaging PPC as a CMC to pursue claims on their behalf in return for a success fee.  PPC also failed to present accurate and specific complaints to banks and submitted generic allegations to FOS rather than specific allegations.

Government Breathing Space Scheme

Last year the Government announced proposals on Breathing Space scheme. At a high level, the scheme would see a 60-day breathing space period and enforcement action from creditors halted and interest frozen for consumers with problem debt and provision for professional debt advice to help them find a long-term solution to their financial difficulties (see our briefing note for further information). Legislation to further the proposals had originally been planned to enter Parliament in late 2019, but the General Election meant that this was not possible. Since then, we have been waiting for news to see whether the Government would proceed with the scheme. The Government recently announced that it will introduce the scheme in early 2021 (as planned). Unsurprisingly debt charities have welcomed this news. As set out in our briefing note, the scheme will have a significant impact on the way lenders interact with their customers in default and pursue outstanding debts. Lenders should therefore start planning how they will adapt their systems, policies and processes in good time prior to early 2021.

New overdraft rules

Complicated or high overdraft charges are frequently the focus of FOS complaints. However, this may be set to change when new rules come into force in April 2020, which the FCA estimates will mean that 7 out of 10 overdraft users will be better off or see no change.

From April 2020, firms will only be able to charge a simple annual interest rate – without additional fees and charges for using an overdraft.  The FCA has reported that all users of unarranged overdrafts will be better off or see no change and that a majority of consumers using an arranged overdraft will also see an improved outcome or no difference.  The new rules are intended to be easier for customers to understand and so that they can compare overdrafts between different providers and different forms of credit.  It is hoped that once the new rules have had chance to embed, we will see less complaints on this topic. 

On the horizon

  • In July 2018, the FCA published a discussion paper on price discrimination in the cash savings market.  The FCA has recently published a consultation paper on new rules requiring firms to pay their customers single rates for easy access cash savings and ISA products no later than 12 months after the account was opened.  The proposal is intended to simplify the market for consumers and increasing competition between firms.  The consultation is open until 9 April 2020, after which, the FCA will assess responses and publish next steps later in 2020.
  • The FCA recently published results to a survey on mortgage prisoners. The FCA is keen for as many lenders as possible to offer the modified affordability assessment, but the evidence so far has shown little desire from larger lenders to adopt the changes.
  • The FCA has written to credit card firms telling them to review their approach to borrowers who have been in persistent debt for three years, where they are paying more in interest, fees and charges than they are paying of their balance.  If customers cannot afford any potential repayment arrangements proposed by the firm, they must be treated with forbearance and due consideration, for example, by reducing, waiving or cancelling any interest or charges.  Firms should not suspend credit cards without having an objectively justifiable reason.