Modernising the redress system (HTML)

Consumer Scotland is the statutory body for consumers in Scotland. Established by the Consumer Scotland Act 2020, we are accountable to the Scottish Parliament. The Act defines consumers as individuals and small businesses that purchase, use or receive in Scotland goods or services supplied by a business, profession, not for profit enterprise, or public body.

Our purpose is to improve outcomes for current and future consumers, and our strategic objectives are:

• to enhance understanding and awareness of consumer issues by strengthening the evidence base
• to serve the needs and aspirations of current and future consumers by inspiring and influencing the public, private and third sectors
• to enable the active participation of consumers in a fairer economy by improving access to information and support

Consumer Scotland uses data, research and analysis to inform our work on the key issues facing consumers in Scotland. In conjunction with that evidence base we seek a consumer perspective through the application of the consumer principles of access, choice, safety, information, fairness, representation, sustainability and redress.

Consumer Principles

The Consumer Principles are a set of principles developed by consumer organisations in the UK and overseas.

Consumer Scotland uses the Consumer Principles as a framework through which to analyse the evidence on markets and related issues from a consumer perspective.

The Consumer Principles are:

• Access: Can people get the goods or services they need or want?
• Choice: Is there any?
• Safety: Are the goods or services dangerous to health or welfare?
• Information: Is it available, accurate and useful
• Fairness: Are some or all consumers unfairly discriminated against?
• Representation: Do consumers have a say in how goods or services are provided?
• Redress: If things go wrong, is there a system for making things right?
• Sustainability: Are consumers enabled to make sustainable choices?

We have identified redress, fairness and information  as being particularly relevant to the consultation proposal that we are responding to.

Summary

Consumer Scotland responds to the key proposals in the consultation as follows:

Registration:

• We broadly support proposals to introduce a light touch registration stage
• Registration should be accompanied by measures to ensure the Financial Ombudsman service is underpinned by inclusive design, access to plain language guidance and support for consumers via a variety of channels
• Data and monitoring will be required to assess the effectiveness of the measures
• Pauses, where complaints are held at registration stage,  should be for the shortest time necessary and be accompanied by clear and regular updates to complainers

Dismissal of complaints:

In the absence of a detailed cost benefit analysis, it is difficult to identify clear benefits to consumers, either individually or as a group, arising from the proposals on the dismissal of complaints.

We question whether it is efficient or effective to implement these changes to the Rules and the DISP in advance of the UK Parliament considering the legislation required to make other more significant changes to the complaints regime. It would be preferable for there to be clarity on these larger landscape changes before the accompanying Rules and DISP changes are made. Making these changes prematurely creates a risk that further changes will be needed to bring the Rules and DISP into line with any final proposals agreed by the Parliament, which is inefficient and risks confusion for consumers.

Furthermore, we are concerned that some of the proposals present a risk that the overall balance of rules will begin to tilt in favour of the firm rather than the consumer.  In particular we are concerned application of a large volume of specific rules will, over time, change the nature of the FO service, moving it from a free accessible and user-friendly service towards one that is rules based, inflexible and difficult to navigate.   

If the proposed changes do proceed then we recommend:

Measures on dismissals must be underpinned by clear policies on:

• how the FO will treat complainers in vulnerable circumstances fairly
• service standards detailing escalation procedures
• how the FO will deal with complaints about their own staff and procedures.

Rather than specifying grounds for dismissal in individual rules, the Ombudsman should instead retain the ability to examine what is fair and reasonable in the overall circumstances of each individual case, to exercise a broad discretion, and to provide reasons for their decision. 

If compliance with FCA Rules is to be a relevant factor justifying dismissal, then a requirement to comply with consumer protection law should also be incorporated into the Rules.

To assess the impact of these changes, the FO should put in place detailed monitoring, as well as conducting research on user experiences and seeking regular user feedback.

Overview

The Government, FCA and Financial Ombudsman have previously consulted on proposals to improve outcomes for consumers and provide firms with greater certainty. Some of these measures require legislative changes, and the UK Government has stated that it will legislate when Parliamentary time allows. Ahead of legislation, the FCA and Financial Ombudsman (FO)) have identified changes possible within the existing framework, including initial implementation of the new referral mechanism and proposed updates to the ‘fair and reasonable’ test.

The stated aim of the proposals is to achieve greater predictability, certainty and transparency in the redress system. The FCA hopes to achieve this by ensuring that firms notify the FCA earlier about emerging redress issues (including mass redress events)  and act to provide redress quickly to consumers.  The FCA also believe that reducing the volume of poorly evidenced/abandoned complaints referred to FO will improve the speed of service for other customers. Consumer Scotland broadly supports proposals to introduce a light touch registration stage. However, this should be introduced alongside measures to ensure the FO service is underpinned by inclusive design, access to plain language guidance and support for consumers via a variety of channels. Consideration of the effectiveness of the measures should be backed by detailed data and monitoring.

In relation to the proposal to allow pauses at the Registration stage, these pauses should be for the shortest time necessary and be accompanied by clear and regular updates to complainers.

A large number of other dismissal grounds are being consulted on.  We broadly agree that the FO should have a discretion to dismiss complaints which are frivolous, vexatious and without merit or where a complainer is abusive or acts unreasonably. However, these measures must be underpinned by clear policies on how the FO will treat complainers in vulnerable circumstances fairly, along with service standards detailing escalation procedures, and how it will deal with complaints about their own staff and procedures. This should also address the type of support it can give to complainers and nominated individuals or advocacy bodies who may be representing them.

While many of the individual grounds for dismissal are sensible, Consumer Scotland is concerned that the application of a large volume of specific rules will, over time, change the nature of the FO service, moving it from a free, accessible and user-friendly service towards one that is rules based, inflexible and difficult to navigate. Rather than specifying these grounds in individual rules, we would instead recommend that the Ombudsman should retain the ability to examine what is fair and reasonable in the overall circumstances of each individual case, to exercise a broad discretion, and to provide reasons for their decision. 

We also recommend that if compliance with FCA Rules is to be a relevant factor justifying dismissal, then a requirement to comply with consumer protection law should also be incorporated into the Rules.

We note that a detailed EQUIA will be provided for the FO proposals alongside final policy proposals, but that there are difficulties in conducting detailed data analysis due to information on complainer’s characteristics not previously being collected. We welcome the commitment to collect this information in future. As well as providing information about who uses the FO services, it can also enable comparisons against the demographics of financial services users, identifying where certain groups may have disproportionately low levels of access to FO services and enabling targeting of future information or outreach efforts. This information is important to allow identification of any barriers to complaint processes for consumers.

We recommend that in considering the impact of these changes, the FO should put in place detailed monitoring, as well as conducting research on user experiences and seeking regular user feedback.  

Overall, in the absence of a detailed cost benefit analysis, Consumer Scotland finds it difficult to identify clear benefits to consumers arising from these proposals, either individually or as a group.  In addition, we question whether it is efficient or effective to implement these changes to the Rules and the DISP in advance of the UK Parliament considering the legislation required to make other more significant changes to the complaints regime. It would be preferable for there to be clarity on these larger landscape changes before the accompanying Rules and DISP changes are made. Making these changes prematurely creates a risk that further changes will be needed to bring the Rules and DISP into line with any final proposals agreed by the Parliament, which is inefficient and risks confusion for consumers. 

Registration Stage

Question 1. Do you agree with the proposed rules to introduce a registration stage (pre-registration and registration stages), as set out in the Appendix? If not, please give evidence or reasons as to why not.

Question 2: Do you agree with the proposal for the Financial Ombudsman to assess whether a case is ready to investigate within the registration stage, recognising that it will develop and publish further supporting guidance to support the rules in due course? If not, please give reasons or evidence as to why not.

Question 3: Do you have any other comments, data, evidence, or suggestions regarding the proposed registration stage?

Consumer Scotland broadly supports the introduction of a high-level, “light touch” registration stage to ensure that complaints are within the jurisdiction of the FO, are not premature, and contain sufficient information to enable investigation. This should be in the nature of a gateway check, and should not be a detailed investigation.  Rather than consumers feeling this is a separate process, this should be part of their overall complaints journey and should not feel like an additional stage.

We agree with other consumer groups that it is critical to maintain accessibility and provide  support, especially for consumers in vulnerable circumstances.  We recommend that the FO adopts plain language guidance, an inclusive design process which includes user testing, and provides complainers with a variety of contact methods to reduce the risk of digital exclusion. It is likely that some complainers will need more support than just the provision of written guidance and it is important that the complaint process can respond to this need. Consideration should also be given to how the FO can engage with advocates, advice agencies or other nominated individuals who might assist consumers.  Many consumers may not know what information is relevant or be aware of the formal terminology or product description and it is important that any requirement to provide information does not shift the burden away from firms and onto consumers. Such a step would be inconsistent with the consumer duty which requires a strong focus on driving better outcomes.  Where additional evidence is required to progress complaints, consideration should be given to whether this can obtained from the provider’s files rather than placing the burden on consumers.  We also support the proposal that any checklist of information required should be product specific and not universal.

We recommend that introducing any registration stage is supported by detailed monitoring of complaint numbers and complainer demographics to ensure that it is not a barrier to redress. We would caution against viewing a drop in raw complaint numbers as evidence of success of this measure. Rather, it is important to measure changes in the proportion of complaints that are premature, out of jurisdiction or which might be judged to be frivolous, vexatious or without merit.

In addition, we recommend that the FO conducts qualitative research on the experience of users throughout the complaints process and collects regular user feedback, the results of which should be presented to the FO Board, and published.

Dismissal of Complaints

Question 4: Do you agree that the Financial Ombudsman should retain the ability to dismiss complaints that are frivolous or vexatious? If not, please give evidence or reasons as to why not.

We note that the UK Government intends to remove the FO from the scope of the 2015 ADR Regulations in Spring 2026, suggesting that this allows for rules to provide more clarity to complainants, professional representatives and firms about when the FO might not consider the merits of a particular complaint. This is said to benefit complainants, firms and stakeholders, as well as making the FO more efficient.

We agree that the FO should have a discretion to dismiss complaints which are frivolous, vexatious and without merit. These terms are common across Ombudsman jurisdictions, and are used by bodies such as the Information Commissioner’s office and the Scottish Legal Complaints Commission. They are likely to be well understood by dispute resolution professionals and the courts. However, the terms are unlikely to be understood well by consumers and may cause upset or distress due to the nature of the terminology. It is important that any communication using these terms is able to be conveyed in a way that does not deepen consumer frustration. Consideration should be given to whether alternative terms could be used.

Question 5: Do you agree that the Financial Ombudsman should be able to dismiss complaints where complainants have acted vexatiously, abusively or otherwise unreasonably? If not, please give evidence or reasons as to why not.

We note that there are safeguards associated with this measure, including the opportunity for representations by individuals before any dismissal on a case-by-case basis. A dismissal does not affect their existing legal rights against a firm or operate as a lifetime bar on referrals to FO.  On that basis we support this measure.

However, in many cases challenging behaviour can be caused by frustrations with complaint systems or the stress of the circumstances giving rise to the complaint, which can exacerbate vulnerabilities. We would also welcome the FO publishing a policy on how it will treat complainers in vulnerable circumstances fairly, to provide an indication of the type of support it can give to complainers, nominated individuals who support them and advocacy bodies. The FO should publish details of how it will ensure that it treats complainers in vulnerable circumstances fairly, along with service standards detailing escalation procedures, and how it will deal with complaints about their own staff and procedures. It should also consider what staff training is required to support staff to manage challenging behaviours effectively while protecting their own wellbeing.

Question 6: Do you agree that the Financial Ombudsman should be able to dismiss complaints where the respondent has reviewed the subject matter of the complaint in accordance with (a) the regulatory standards for the review of such transactions prevailing at the time of the review; or (b) any formal regulatory requirement, standard or guidance published by the FCA or other regulator in respect of that type of complaint? If not, please give evidence or reasons as to why not.

Question 7: Do you agree that the Financial Ombudsman should be able to dismiss complaints where, the Financial Ombudsman is satisfied, having considered its responsibilities under s. 404B FSMA, the respondent has reviewed the subject matter of the complaint in accordance with a consumer redress scheme? If not, please give evidence or reasons as to why not.

As these questions raise similar issues, we have chosen to answer them together. We note that the FO can consider a complaint where a consumer can demonstrate that the firm did not address the particular circumstances of the case. It would be useful to clarify whether this includes cases where the consumer believes that the firm’s review did not comply with the regulatory requirements.  

For complaints which fall under a specified redress scheme, FO must determine these complaints in accordance with the scheme rules.  FO may still consider cases which genuinely do not fall within the scope of the redress scheme.  The consultation states that a discretion to dismiss in such cases would enable efficient filtering out between cases where a complainant fundamentally disagrees with how a firm complied with the redress scheme requirements and complaints relating to issues beyond the scope of the redress scheme. This proposal will not adversely affect consumers who need to complain if a firm fails to comply with the terms of the FCA’s forthcoming Section 404 redress scheme for cases about Motor Finance Commission.  

In both cases, we consider there is a risk that the overall balance of rules will begin to tilt in favour of the firm rather than the consumer. Having to establish that a matter falls outside of a specific redress scheme or whether a firm has complied with the requirements of a regulator requires a detailed understanding of the rules and an ability to apply them that is likely to be outside many consumers’ ability or comfort zone. Given the number of grounds for dismissal being consulted on here, it is possible that consumers might find it difficult to navigate these systems and feel that the burden is on them to demonstrate that dismissal grounds do not apply.

The Ombudsman Association applies certain criteria for use of the term Ombudsman. These are independence; fairness; effectiveness; openness and transparency; and accountability. The UK Government’s guidance on establishing Ombudsman schemes notes that schemes “ are designed to be free to the complainant and user-friendly. Complainants do not normally need legal representation or other assistance to access Ombudsman schemes. Ombudsman are inquisitorial and proceed by way of investigation and not by way of adversarial hearings. They provide a level playing field between the individual complainant and organisations….. Ombudsman schemes provide remedies which are fair and reasonable in all the circumstances, and are not bound by a strict interpretation of the law or precedent.”[1]

Consumer Scotland is concerned that the application of a large volume of specific rules will, over time, change the nature of the FO service, moving it from a free accessible and user-friendly service towards one that is rules based, inflexible and difficult to navigate. We would instead recommend that the Ombudsman should retain the ability to examine what is fair and reasonable in the overall circumstances of each individual case and to provide reasons for that decision.

If evidence of compliance with the relevant rules is to be a relevant ground for dismissal, then we strongly recommend that the rule be extend to provide for additional consideration of other relevant rules, such as consumer protection law. Given that the FCA hold concurrent powers in relation to consumer protection law this should be straightforward. It  would ensure that where firm’s practices or communications have been inaccurate, misleading or unfair, then the consumer should be protected.

Question 8: Do you agree that the Financial Ombudsman should be able to bring finality by dismissing complaints where the subject matter of the complaint has previously been considered or excluded under the Financial Ombudsman Service? If not, please give evidence or reasons as to why not.

Question 9: Do you agree with the addition of ‘factual’ into the existing rule? If not, please give evidence or reasons as to why not.

Consumer Scotland is concerned that the application of a large volume of specific rules will over time, change the nature of the service, moving it from a free accessible and user-friendly service towards one that is rules based, inflexible and difficult to navigate. We would instead recommend that the Ombudsman should retain the ability to examine what is fair and reasonable in the overall circumstances of each individual case and to provide reasons for that decision.

Question 10: Do you agree that the Financial Ombudsman should be able to dismiss complaints where the subject matter of the complaint has been dealt with, or is being dealt with, by a comparable complaints scheme, regulatory or law enforcement body or dispute resolution process? If not, please give evidence or reasons as to why not.

Question 11: Do you agree that the Financial Ombudsman should be able to dismiss complaints where the complaint has been or is the subject of court proceedings? If not, please give evidence or reasons as to why not.

Question 12: Do you agree that the Financial Ombudsman should be able to dismiss complaints that are more appropriate for court, arbitration or another complaint scheme or dispute resolution process? If not, please give evidence or reasons as to why not.

Question 13: Do you agree with reintroducing a dismissal ground for complaints about employment matters from an employee, or employees, of a respondent? If not, please give evidence or reasons as to why not.

Question 14: Do you agree with reintroducing a dismissal ground for complaints purely about investment performance? If not, please give evidence or reasons as to why not.

Question 15: Do you agree with reintroducing a dismissal ground for complaints relating to a respondent’s discretion under a will or private trust. If not, please give evidence or reasons as to why not.

Question 16: Do you agree that the Financial Ombudsman should be able to dismiss complaints where there is more than one eligible complainant, but they have not all consented to the complaint? If not, please give evidence or reasons as to why not.

Question 17: Do you agree that the Financial Ombudsman should be able to dismiss complaints for other compelling reasons? If not, please give evidence or reasons as to why not.

Question 18: Do you agree with the examples that are proposed for DISP 3.3.4D G? If not, please give evidence or reasons as to why not.

Question 19: Do you think the six examples that are proposed as guidance for other compelling reasons in DISP 3.3.4D G should instead be separate rules in their own right?

As noted above, Consumer Scotland is concerned that the application of a large volume of specific rules will, over time, change the nature of the service, moving it from a free accessible and user-friendly service towards one that is rules based, inflexible and difficult to navigate. We would instead recommend that the Ombudsman should retain the ability to examine what is fair and reasonable in the overall circumstances of each individual case and to provide reasons for that decision.

Given the stress and financial commitment involved in bringing proceedings to court, and the difficulties in finding civil legal aid, we would be concerned if consumers were regularly being advised that they should instead be seeking to take cases to court. In cases where jurisdictions between other dispute resolution processes overlap, we would not wish to see consumers compelled to use schemes where the levels of redress which can be awarded may differ, especially where these levels may be lower than the FO jurisdiction.

If the FO is to have a discretionary power to dismiss complaints for other compelling reasons (as set out in Q17) then we recommend that rather than being separate grounds, the factors listed in Questions 11-16 should instead be considered when using that discretion. In reaching any decision there should be an overarching requirement for FO to consider what is fair and reasonable in the individual circumstances of each case.

In addition, we consider that many of the factors listed in relation to Question 17 would enable a case to be sifted out at registration stage as being frivolous, vexatious or totally without merit. For example, this may be the case where there is no real prospect of success or no real loss has been suffered. We recommend that further thought be given to how the registration stage discretion interacts with the discretion being proposed here and whether both sets of powers are strictly necessary.

We consider that there are specific issues raised by the proposals in Question 16 regarding complaints where there are allegations of domestic abuse, economic abuse or coercive control and would wish to see detailed consultation with bodies representing victim survivors to ensure that any risks are identified and mitigated.

Question 20: Do you agree with the Financial Ombudsman’s proposed changes to DISP 3 (as set out in the Appendix)? If not, please give evidence or reasons as to why not.

We also agree that the FO should have the power to dismiss cases where a complainer is non responsive or refuses consent to progress a case. However, we would prefer to see this provided for as part  of a broader general discretion.

Question 21: Do you agree with the proposed changes to DISP 3.6.4R? If not, please give reasons or evidence as to why not.

The UK Government’s previous review concluded that the fair and reasonable test should be adapted so that, where FCA rules are relevant, acting in line with those rules and their intent will mean a firm has behaved fairly and reasonably. This will require changes to DISP to implement this. It is proposed to remove  ‘good industry practice’ as a relevant consideration when determining what is fair and reasonable, as its removal reduces the risk of potential misalignment with FCA rules, guidance and standards. Changes will also clarify  that only the standards applicable at the time of the act or omission complained of should be taken into account, to respond to industry concerns about the potential for retrospective interpretation.

In relation to the planned wider legislative reforms, Consumer Scotland favours retaining the current fair and reasonable test. It is used across a number of other ombudsmen schemes, such as legal services, and is well understood. The fair and reasonable test is essential for protecting consumers, particularly in complex markets like financial services. We consider that “good industry practice” represents a higher standard than bare compliance with the Rules and that this change risks downgrading consumer protection.

We recommend that, in addition to FCA rules, any breach of consumer law should also be relevant when assessing what is fair and reasonable in the circumstances of any case. We do not believe that FO is currently prevented from considering whether a firm has complied with the relevant FCA rules in determining what is fair and reasonable. While more explicit references to FCA rules may provide a greater degree of certainty and clarity for industry, it is important that this does not delay justice for consumers or lead to the use of an inflexible, rule-based system. In relation to the specific change proposed in the DISP, we do agree that it is fair and reasonable for firms to be held to account on the basis of the standards in place at the time of the transaction.