Complaints, Dispute Resolution and the Financial Ombudsman Service
This domain tests how firms must handle complaints internally, when a customer can escalate to the Financial Ombudsman Service, and what the FOS can award. Expect timeline calculations, questions on jurisdiction and questions on the status of an ombudsman's decision.
Internal handling (DISP 1)
A complaint is any oral or written expression of dissatisfaction, whether justified. Firms should resolve straightforward complaints quickly, and a complaint resolved by the close of the third business day may be handled informally with a summary resolution communication. Otherwise the firm must issue a final response within eight weeks, explaining the outcome and the right to go to the FOS within six months. Firms must keep records, report complaints data and analyse root causes.
The Financial Ombudsman Service
- Compulsory jurisdiction covers FCA-authorised firms; a voluntary jurisdiction covers some others.
- Time limits: the complaint must generally be brought within six years of the event, or three years of the complainant becoming aware of the problem, and within six months of the firm's final response.
- The FOS decides what is fair and reasonable in all the circumstances, not strictly what a court would decide. It is not bound by its own precedents but aims for consistency.
- Awards are capped by a limit set by the FCA (currently £430,000 - confirm the current figure). The ombudsman may also order interest, an apology or other practical remediation.
- An ombudsman's decision is binding on the firm if the complainant accepts it within the stated period. The complainant may instead go to court.
Related redress
FSCS provides compensation of last resort where a firm fails. Firms must also handle complaints about non-insurance activities under the same framework.
Worked example
A complaint is received on 3 March. The eight-week deadline falls on 28 April. The firm issues its final response on 10 April. The customer must refer to the FOS by 10 October - six months from the final response - provided the underlying events are within six years. If the customer waits until November, the FOS will normally decline jurisdiction as out of time, absent exceptional circumstances.
Traps that cost marks
- Confusing the eight-week firm deadline with the six-month referral window.
- Assuming the FOS must follow court precedent or its own earlier decisions.
- Believing the FOS can fine a firm; it awards redress.
- Forgetting that the complainant must accept the decision for it to bind the firm.
- Overlooking the six-year and three-year jurisdiction tests.