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ombudsman news

issue 70

June / July 2008

ombudsman focus: overheard at our technical advice desk

This month's ombudsman focus provides a round-up of some of the questions put to our technical advice desk recently about changes to the dispute resolution (DISP) rules.

I run a small financial services business. I hear that the dispute-resolution (DISP) rules have been updated. Is that right-

Yes. Updated rules about how you deal with complaints in-house (DISP 1) came into force on 1 November 2007 - with a couple of minor amendments following on 6 July 2008. Updated rules describing the ombudsman service's jurisdiction (DISP 2) and our procedures (DISP 3) came into force from 6 April 2008.

who updated the rules and why-

Some of the DISP rules are made by the FSA. The others are made by the ombudsman service, and approved by the FSA. We worked together on the changes, which were designed mainly to make the rules shorter (by about 30%) and easier to understand. The DISP 1 rules also take account of the European Markets in Financial Instruments Directive (MiFID), but that only affects cross-border branches doing investment business.

well, mine is just an ordinary business (with no cross-border branch) - so how do the updated rules affect me when I'm dealing with complaints-

You will find the rules easier to read, and less prescriptive - but the basic process remains the same. You must still publish details of your complaints-handling process (including access to the ombudsman service) and make this available around the point of sale.

But you no longer have to display a notice saying you are covered by the ombudsman service.

I hope my business never receives a complaint, but what changes are there if I do receive one-

You must still send the consumer an acknowledgement and provide a copy of your complaints-handling process, but the rules now require you to do this "promptly" rather than within a set time of 5 days. And the rules now require you to keep the consumer informed about your investigation of the complaint, rather than requiring a letter at the 4-week stage.

have the rules about written responses and final responses to consumer complaints changed-

The rules about responses remain largely the same - though you can no longer get consumers to settle on the basis of an interim response without telling them about the Financial Ombudsman Service. And, where responses are required to mention the ombudsman service, this must now be in the letter itself and not just in an enclosed leaflet.

how have the rules on the ombudsman service's jurisdiction in DISP 2 changed-

Again, you will find the rules easier to read - and they are set out in a new order. First, they explain which business activities are covered by the ombudsman service (by type and where they are carried on); then, which consumers are eligible to complain; and finally, the time limits which apply.

are the business activities covered still the same as before-

There is no change to the activities covered by our compulsory jurisdiction and the consumer credit jurisdiction (which apply automatically to FSA-regulated firms, businesses with standard consumer-credit licences and to former firms and licensees) - though the rules clarify that "ancillary banking services" include foreign exchange.

There is a change for the voluntary jurisdiction (which some businesses choose to join). This has been extended to cover all activities directed at the United Kingdom from elsewhere in the European Economic Area which would have been covered by the compulsory jurisdiction or consumer credit jurisdiction if carried on from the UK.

have there been any changes to the types of consumer who are eligible to complain-

These remain the same except in two cases. First, the assignee of an insurance policy is now eligible not only where there is a legal assignment (as before) but also where there is an equitable assignment.

Second, the position on third parties has been clarified; under the rules, third parties involved in motor accidents are not now eligible complainants.

are the time limits still the same-

There have been no changes in the time limits for referring a complaint to the ombudsman service.

so are there any changes in DISP 3, the rules about the ombudsman service's procedures-

The overall procedures remain basically the same, but the opportunity has been taken to clarify a few points on which some businesses (and some consumers) were unclear.

what sort of points do you mean-

Well, consumers sometimes get confused about who their complaint is against - especially where a couple of financial businesses are involved, for example an insurance broker and an insurance company. The new rules make it clear that the ombudsman service can point the consumer towards the correct business.

that seems sensible - but what if a single consumer's complaint genuinely involves two businesses-

In that case, the new rules clarify that we can look at both aspects of the case through a single investigation, though we will still issue a separate decision in respect of each financial business. And, where appropriate, we can apportion the consumer's loss between the businesses which contributed to it.

is there anything else-

Where appropriate, an ombudsman can hold a hearing by phone. And, in line with partnership law, the rules confirm that we are not required to deal separately with each of the partners in a partnership - one partner, on behalf of the partnership as a whole, suffices.

Our technical advice desk answers a wide range of queries from financial businesses and consumer advisers about the ombudsman service and how we operate - including providing informal assistance on the ombudsman's approach to particular topics.

You can call the technical advice desk on 020 7964 1400 or email technical.advice @financial-ombudsman.org.uk

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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.