FCA Complaints Handling and Redress 2 — Questions and Answers
Question 1: The Financial Ombudsman Service was established under which legislation?
- Financial Services Act 1986
- Financial Services and Markets Act 2000 (FSMA) (Correct answer)
- Consumer Credit Act 1974
- Financial Services Act 2012
Correct answer: Financial Services and Markets Act 2000 (FSMA)
The FOS was established under the Financial Services and Markets Act 2000 (FSMA) as the statutory scheme for resolving disputes between consumers and authorized financial firms.
Question 2: On what basis does the Financial Ombudsman Service decide complaints?
- Strictly on legal principles as applied by a court
- What is fair and reasonable in all the circumstances of the case (Correct answer)
- Based solely on contractual terms between the parties
- Based on industry best practice guidelines only
Correct answer: What is fair and reasonable in all the circumstances of the case
Under DISP 3.6.1, the FOS determines complaints on the basis of what is fair and reasonable in all the circumstances, which may go beyond strict legal rights.
Question 3: What is the FOS award limit for complaints referred on or after 1 April 2020?
- £150,000
- £350,000
- £375,000 (Correct answer)
- £500,000
Correct answer: £375,000
The FOS compulsory jurisdiction award limit was increased to £375,000 for complaints referred on or after 1 April 2020, reflecting inflation and the need to provide meaningful redress.
Question 4: Under DISP, what must a firm do upon receiving a complaint from an eligible complainant?
- Immediately refer the complainant to the FOS without investigating
- Acknowledge, investigate thoroughly, and respond appropriately within required timeframes (Correct answer)
- Offer compensation within 24 hours to avoid regulatory scrutiny
- Only handle complaints submitted in writing via registered post
Correct answer: Acknowledge, investigate thoroughly, and respond appropriately within required timeframes
Firms must have procedures to acknowledge, investigate, and respond to complaints fairly and promptly, adhering to DISP timeframes and notification requirements.
Question 5: In the context of FCA complaints handling, what does 'redress' mean?
- A formal regulatory fine imposed by the FCA on a firm
- Compensation or remedial action to restore the complainant to the position they should have been in (Correct answer)
- A warning notice sent to a firm prior to enforcement action
- A requirement to publish complaints data on the firm's website
Correct answer: Compensation or remedial action to restore the complainant to the position they should have been in
Redress refers to the remedy provided to a complainant — typically financial compensation — intended to put them back in the position they would have been in had the firm not acted improperly.
Question 6: Under DISP 1.10, firms are required to report complaints data to the FCA. How frequently must this reporting occur?
- Monthly
- Quarterly
- Every 6 months (bi-annually) (Correct answer)
- Annually
Correct answer: Every 6 months (bi-annually)
DISP 1.10 requires firms to submit a complaints return to the FCA every 6 months, enabling the FCA to monitor complaints trends and identify firms or sectors with potential conduct issues.
Question 7: Which of the following statements about the FOS compulsory jurisdiction is correct?
- Firms can opt out of the compulsory jurisdiction if they have their own arbitration scheme
- All FCA-authorized firms are automatically subject to the FOS compulsory jurisdiction (Correct answer)
- The compulsory jurisdiction only applies to deposit-taking institutions
- Firms must apply separately to join the FOS compulsory jurisdiction
Correct answer: All FCA-authorized firms are automatically subject to the FOS compulsory jurisdiction
Under DISP 2.2, FCA authorization automatically brings firms within the FOS compulsory jurisdiction — there is no opt-out and no separate application needed.
FCA Complaints Handling and Redress 2
The Financial Ombudsman Service was established under which legislation?