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ombudsman news

issue 59

January/February 2007

ask ombudsman news

claims management regulation

Back in December 2005, you said in ombudsman news that claims management companies were to be regulated by law. What progress has been made towards this-

an independent financial adviser

At the ombudsman service, we prefer to hear direct from consumers, in their own words. And our statistics show that whether a consumer comes to us direct or uses a claims management company - there's no difference to the outcome of the disputes we settle. But consumers who use a claims management company should be aware that the company may charge them - usually by means of an upfront fee or a share of any compensation. Some consumers have not had a fair deal when using claims management companies - and to deal with this, the government passed the Compensation Act last year.

This new legislation will regulate companies and individuals that provide claims management services in areas such as personal and industrial injury, criminal injuries compensation, employment matters, and financial products and services. The Department for Constitutional Affairs will be the regulator. And from 6 April 2007, it will be an offence to provide claims management services without specific authorisation (or exemption).

An authorised claims management business will have to comply with a strict code of conduct, covering areas such as advertising and marketing, handling client money, and dealing with complaints. There is more information about authorisation for claims management businesses on the Department for Constitutional Affairs' special website (www.claimsregulation.gov.uk).

bound by the law ...

My client has filled in the ombudsman's acceptance form, saying she accepts his final decision on her dispute with a financial business. But now the business is saying that before it pays her the money awarded by the ombudsman, she'll have to sign its own, separate, agreement as well - with various conditions and small-print clauses. What's the position here-

an independent financial adviser

Once a consumer has accepted an ombudsman's decision, it is binding in law on both parties. The firm cannot make anything else a requirement on the consumer - either by way of conditions set out in a letter accompanying its cheque, or by any other separate agreement.

extended mortgage remit

Can you please confirm what types of mortgage the ombudsman service covers these days.

a consumer advice centre

We have always been able to deal with mortgage disputes involving banks and building societies - including complaints about advice and administration. These were previously covered by our predecessor ombudsman schemes (the former banking and building societies ombudsmen).

In October 2004, the statutory regulation of mortgages began, with the Financial Services Authority (FSA) as the regulator. Since then we have also covered mortgage disputes involving brokers and mortgage firms other than banks and building societies.

From 6 April 2007 our remit over mortgage-related disputes will extend again, reflecting the increased regulatory role of the FSA from that date. We will be able to deal with complaints about 'home-reversion schemes' sold after that date. Technically, these are not mortgages at all. They are property deals that allow older homeowners, in particular, to release cash ('equity') from their homes without taking out a mortgage. The other main 'equity release' scheme for older people involves 'lifetime mortgages' - which we already cover.

From 6 April the FSA will also start regulating home purchase plans - sometimes called 'Islamic mortgages' - and these will also come under our remit from that date.

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ombudsman news issue 59 [PDF format]

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.