Financial Services and Markets Act 2000 (Ombudsman Scheme) (Fees) Regulations 2024

Earl of Courtown Excerpts

Monday 28th October 2024 Grand Committee

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, I take this opportunity to thank my noble friend the Minister for explaining clearly what this statutory instrument is about. I declare an interest as a member of the Secondary Legislation Scrutiny Committee. I have some questions, about which I have already alerted the Minister. I actually alerted my noble friend Lord Livermore, thinking he would be answering on this, but I think he has passed them on.

There is a concern that, while it is laudable that no charges will be involved for claimants who make direct contact with the Financial Ombudsman Service, which has proven to be an excellent service for people who have particular issues in the financial world, notwithstanding that, some people like the services of professional representatives. A recent survey found that 43% of people were likely to be vulnerable prior to financial scams—we are all beset by them—and 85% became vulnerable in the aftermath as the reality of the situation hits them and their mental health may deteriorate. Will the Minister outline the real reason for eradicating, in many instances, the middle person, the professional representative? That would be very useful.

As we know, all professional representatives are regulated either by the Financial Conduct Authority or the SRA. Claims management companies are explicitly forbidden by regulations from bringing cases that do not have “a good arguable case”, or that are “frivolous or vexatious”. Therefore, firms are required to learn from the FOS approach to ensure that they do not continue to submit cases with an unrealistic chance of success. So why is the FOS not pushing regulators to enforce this more? The FOS would be better highlighting this to the regulators, which have the power to take heavy action against these firms. The ombudsman has the power to reject poor-quality submissions. Why is it not using this to a greater extent against the 10 firms that are particularly clogging up the system?

Finally, could my noble friend the Minister advise, or come back by way of writing, on whether the Government intend to ameliorate the situation? Sometimes, people like the services of professional agents, notwithstanding their level of financial security, and would appreciate that, and they do not think that it is fair that the cost that has been levied on the professional claims person should be passed on to them.

[The Earl of Courtown (Con)]

My Lords, I welcome these regulations and appreciate the very full description of them that the Minister gave. As she said, they enable the Financial Ombudsman Service to amend its rules to charge case fees to claims management companies and legal professionals on behalf of complainants when a customer launches a complaint against a financial services firm.

On these Benches, we believe in the importance of fair and justified financial regulation and the ability for customers to issue a complaint against financial services firms when necessary. We recognise the benefit of this legislation, which seeks to address the economic benefit gained by intermediaries from bringing a case and the large volumes of poorly evidenced complaints submitted to the FOS.

We welcome the Government’s continuation of our work in which we introduced the Financial Services and Markets Act 2023, which enabled the Government to add to the list of persons to whom the FOS can charge fees. I would like answers to a couple of questions, but the Minister can write to me if need be. What measures are His Majesty’s Government taking to ensure that genuine and well-evidenced complaints continue to be submitted to, and heard by, the Financial Ombudsman Service? Can the Government confirm that this legislation will not result in increases in fees paid by consumers who have submitted a complaint?

I was interested in the points raised by the noble Baroness, Lady Ritchie, and look forward to hearing the Minister’s responses to them. As I said, we support these regulations, and I look forward to the response from the Minister.

[Baroness Blake of Leeds (Lab)]

I thank both my noble friend Lady Ritchie and the noble Earl, Lord Courtown, for their comments, in particular their close consideration of these draft regulations. It is important that everyone in the Committee has an opportunity to raise important points. I re-emphasise that this SI will play an important role in ensuring that the Financial Ombudsman Service can focus on promptly resolving consumer complaints and reduce the impact of spurious complaints on financial services firms.

I thank my noble friend Lady Ritchie for her detailed questions. I know from her comments earlier, before we came into this Committee, that her primary concern is for the consumer and to make sure that the necessary protection is in place. By way of reassurance, we are looking at the needs of vulnerable people, in particular, to make sure that they will not be disadvantaged by this amendment; that is the crux of what we need to address today.

I re-emphasise that the Government are clear that all consumers should be able to access the FOS without the need for professional representative support. Serious consideration has been given to that while developing this policy. The final outcome, as I mentioned earlier, is that charities, family members and advisory organisations will not be charged for this service; that is an important consideration. Another aspect here—it is reassuring, I hope—is that the FOS has a dedicated accessibility team as well as the additional support team, working specifically to ensure that complaints with additional needs are added. I hope that that goes some way to providing the reassurance sought.

The other question is: should the Financial Conduct Authority not be doing more to regulate professional representatives effectively in the first place? It is a very reasonable question. The Financial Conduct Authority and the Solicitors Regulation Authority play an important role in regulating, respectively, claims management companies and law firms. The Government strongly support the relevant regulators in taking robust action to tackle poor claims management behaviour wherever it arises.

There is an important point here that needs to be firmly pointed out. We re-emphasise: all consumers can access the service free of charge and without the need for any professional representative support. Where consumers choose to use a professional representative, there are rules in place to limit the amounts that these firms can charge. The FCA, which regulates claims management companies and professional representatives, and the Solicitors Regulation Authority, which regulates legal professionals, already restrict the fees that a professional representative can charge to consumers through their fee cap rules. The FCA has agreed that any fee paid by professional representatives to the Financial Ombudsman Service will be included in this cap; this will prevent fees being passed on to consumers in cases where the representative is charging at the maximum level, which the FOS understands to be the case already for most professional representatives.

If there is a feeling that I need to follow up in writing, I will of course do so, but, with those closing comments, I hope that we can move forward.