Key Changes and Implications
In a collaborative effort, the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA), and Bank of England have unveiled their revised Complaints Scheme, which fundamentally shapes the protocol for addressing and managing grievances lodged against the U.K. regulatory bodies. This revamped framework encompasses several significant modifications:
1. Discretionary Compensation Bands for Non-Financial Loss
A noteworthy inclusion in the revised Complaints Scheme is the introduction of distinct discretionary compensation bands that cater to instances of non-financial loss arising from actions or inactions of the regulatory bodies. This ranges from £100 for relatively minor stress or inconvenience to over £2,500 in exceptional scenarios where the aftermath of regulatory failings is notably severe.
2. "Sole or Primary Cause" Test for Financial Loss Compensation
A novel evaluation criterion has been integrated to determine the eligibility for compensation payments pertaining to financial loss. Termed the "sole or primary cause" test, this benchmark triggers compensation if the regulators are unequivocally and significantly at fault, solely or primarily accountable for the financial loss.
This criterion has sparked debates due to its contentious nature. Although criticised for its lack of public consultation, the regulators have opted to incorporate the "sole or primary cause" test into the Complaints Scheme. This move has far-reaching implications, potentially confining the instances in which the regulators assume liability for compensation.
Notably, the previously proposed cap on compensation payments for financial loss at £10,000 has been abandoned following consultation, eliminating an upper limit on compensation. It's important to note, however, that compensatory payments might not encompass the entire extent of complainants' losses, as stipulated by the Scheme.
3. Streamlined Scheme and HM Treasury's Role
Efforts to enhance accessibility and understanding are evident through the simplification of the Scheme's language and the incorporation of visual aids such as diagrams to elucidate the complaints process. Additionally, the Scheme reflects the alignment of HM Treasury's role in appointing the Complaints Commissioner with the provisions of the Financial Services and Markets Act 2023.
These pivotal amendments will come into effect on November 1, 2023. The revised Complaints Scheme signifies a substantial evolution in the dynamics of complaints management within the U.K. financial regulatory landscape, setting the stage for a more comprehensive and transparent process.
If you want more information on the new complaints procedure and its application reach out to MEMA for more information on how we can support you