Giving her inaugural Mansion House speech in London yesterday, Rachel Reeves said the service played a “vital role” for consumers to get redress when things have gone wrong.
However, she explained that reform was needed to create a “surer climate for investment”.
New agreement
The Government has worked with the Financial Conduct Authority (FCA) and the ombudsman to develop a new agreement between the two institutions.
It has “clearer expectations on how they cooperate”, including on historical market practice and mass redress events, like the much-publicised PPI scandal and the current review over the mis-selling of car finance.
A ‘call for input’ is in process, which seeks to significantly improve the rules governing how the service operates.
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The changes are part of a package of reforms announced by the Chancellor to drive growth and competitiveness in financial services.
She argued that the regulatory changes that were implemented to eliminate risk following the financial crisis had “gone too far” and had led to unintended consequences.
Rebalance the system
She wants to rebalance the system, setting the financial services sector up to innovate, grow and seize the opportunities for investment across Britain.
Jonathan Herbst, global head of financial services at law firm Norton Rose Fulbright, said the changes would be welcomed by the industry.
He said: “A robust and efficient consumer redress structure is key, but it is fair to say that the lack of predictability of ombudsman decisions and the limited use of collective redress mechanisms have historically placed a significant burden on firms.
“So, for most in the industry, it is not about giving less compensation if things do go wrong but rather about making the whole process more efficient and predictable. Anything that helps with this can only be welcome.”
This article was first published on YourMoney.com‘s sister site, Mortgage Solutions. Read: The Financial Ombudsman Service is to be reformed, Chancellor announces
