What's in store for the FCA and FOS in 2023/2024?
April has seen the publication of the Financial Ombudsman Service and Financial Conduct Authority's Plans and Budgets for 2023/2024 – what can we learn from their strategic priorities?
For both the FOS and FCA we see an emphasis on the consumer duty – with the FCA having in place a specific budget to embed the consumer duty and an interventions team in place from day 1 of the duty to ensure compliance. Both also focus on the cost of living with FOS expecting complaints in this area and the FCA noting a focus on debt services.
For FOS we also see an emphasis on dealing with the complaint backlog with new "vertical" specialist teams and a portal for making complaints and uploading documents/information. For the FCA a focus on data led intervention and supervision.
Financial Ombudsman Service
The FOS budget and plan for 2023/24 notes a reduction in its current caseload with it expecting to have resolved 205,000 customer cases, reducing the number of cases in progress by 40% to below 70,000 cases during 2022/23. The focus on reducing the number of complaints sat at FOS is reiterated for 2023/24 with the aim that it will exit 2023/24 with a complaint stock of 47,000 complaints and it will "continue to resolve cases quicker, without compromising quality". In the plan FOS acknowledges that "it continues to take us too long to resolve cases".
Other strategic priorities include:
- Completing the alignment of casework structure to industry areas
- Enabling complainants and respondent business to "self-serve" through digital portals
- Improving the quality of data and to leverage data to share "high quality insight" with industry
FOS service standards include for complaints received from 1 April 2023 that 70% of cases are resolved within three months from the point FOS accept the complaint and 90% within 6 months from the point FOS accept the complaint.
The FOS budget and plan also includes details of trends it is monitoring and expecting to see – for the investment and pensions areas – it notes an expected increase in complaints given the British Steel consumer redress scheme, a rise in investment and cryptocurrency scams, more complaints relating to surrender and execution delays, performance and portfolio management complaints due to cost of living concerns and the overall impact of living concerns. Other notable trends identified include uncertainty over the impact of funeral plans and an increase in mortgage related and consumer credit complaints due to interest rate rises. Respondents to the FOS budget and plan also highlighted the new consumer duty as being an area likely to result in a short-term increase in complaints as the duty is implemented from the end of July 2023 for new and current products.
As with FOS' plan and budget, the FCA also highlights the cost of living and consumer duty as challenges for 2023/24.
The FCA focuses in its budget and plan for 2023/24 notably include areas where it will take on regulatory oversight – with cryptoassets and deferral payment credit – now falling within the FCA's regulatory regime.
The FCA's plan and budget also outlines three focuses:
- Reducing and preventing serious harm
This is split between – dealing with problem firms, reducing harm from firm failure, improving oversight of the appointed representatives regime, reducing and preventing financial crime and delivering assertive action on market abuse.
For the advice market the notable sections are "reducing harm from firm failure" and the appointed representatives regime.
The section on reducing harm from firm failure includes "improving the redress framework" with the plan noting "We want to see more consumers get redress from the firm that owes them money so that a smaller proportion of costs are passed on to other regulated firms…" with an outcome for the FCA identified as being "firms that create a redress burden are more likely to bear the associated costs themselves". The FCA proposes to achieve this outcome by consulting on guidance for firms on redress calculations, reviewing access to FOS for small and medium sized enterprises and developing proposals to improve complaints reporting. Further the FCA is to introduce a new regulatory return requiring 20,000 solo regulated financial firms to provide a baseline level of information about their financial resilience.
With the new appointed representatives regime, the FCA wants to achieve stronger oversight by principals to reduce harm caused through appointed representatives. The FCA's plans include undertaking more assertive supervision of high-risk principals and supporting consideration of potential legislative changes.
- Setting and testing higher standards
This focus encompasses putting consumers first, enabling consumers to help themselves, environmental, social and governance (ESG) priorities and minimising the impact of operational disruptions.
There is emphasis an on the consumer duty – the plan notes that additional funding assigned to the consumer duty allows the FCA to undertake sector-specific supervisory work to identify and "assertively supervise" and enforce against activities that undermine effective competition and good consumer outcomes. The FCA also plans to create an additional interventions team within enforcement – in place at the time the consumer duty comes into force. There is also an emphasis on the cost of living crisis and with that debt advice – with new rules planned to ban debt packagers from receiving referral fees.
The plan also emphasises supervisory activity over financial promotions, misleading marketing and disclosure around ESG-related products and actively monitoring how effectively firms and listed companies implement climate related financial disclosures.
- Promoting competitive and positive change
A key facet is the Future Regulatory Framework (i.e. what the UK's financial services regulatory framework will look like following the UK leaving the EU) with changes to the listing rules and implementation of changes from the Wholesale Markets Review. Activities here include bringing forward proposals on asset management regulation.
Overall, there are some interesting insights into what we can expect for 2022/23 – the consumer duty is a running theme for both the FOS and FCA as is the cost-of-living crisis. Both the FOS and FCA also emphasise the use of data as a way to develop their oversight and activity and the FCA notes some areas where it appears to have a particular focus including ESG reporting, the promotion of investments, asset management regulation and the appointed representatives regime. However, the what really matter is what the FOS and the FCA do – and that's something we will have to wait to see.