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The FSA consults yet again on PPI complaint handling while the FOS burns. CP 10/6 corrects some earlier errors in the previous consultation on PPI complaint handling. However, it shows up the FSA as having failed to obtain Treasury consent for its proposed review of past rejected complaints. The regulator has temporarily abandoned that. The result is some guidance on how to handle complaints and a further consultation period on it. The result has been a surge of demand for courses on PPI complaint handling.
The big area of fear for lenders is the current surge in bad lending complaints. As a result, a specific bad lending course has been run either on its own or in combination with a PPI course. The issues on compensation are particularly difficult. The subject splits into three parts on liability: bad advice, irresponsible lending and bad arrears management. With two fines in the latter area in recent months, this is becoming a worrying subject.
The Financial Services Act 2010 made it through Parliament before the general election. It is an odd mixture of gesture politics and quite fiddly technical stuff. Most worrying for the FSA is the fact that the replacement provision for section 404 which allows it to institute business reviews without the Treasury's consent is only due to come into force on the order of the Treasury or the Secretary of State (section 26(3). The timetable for this is less than obvious. There will also be opportunities for firms to challenge decisions to hold reviews in front of the Tribunal although most of these cases will be subject to the much stricter standards for judicial review than ordinary applications to the Tribunal.
The Financial Ombudsman Service's second publication of its uphold rates shows that a number of firms are working hard to bring down the percentage of cases that they lose at FOS. Others, though, notably some of the banks and a number of companies in the PPI area have just about given up trying. Their apparent immunity from enforcement action remains puzzling.
A string of fines and insolvencies in the fund management, adviser and product provider areas are drawing attention to the need for these types of companies notably in the structured product and cash-related areas to understand the investments on which the products concerned depend. Standard Life, Tenon, Park Row have all received Final Notices. The administration of NDFA and continued chaos with Arch Cru investments are all part of the same theme.
The Retail Distribution Review headed towards serious obscurantism with its paper on professionalism. The regulator's expectations of professional bodies performing a policing role over ethics hopelessly overstate the resources available to those organizations. Equally, the approach to topping up existing Level 4 qualifications is so theoretical that it is incapable of being carried out in a compliant way.
The Retail Distribution Review papers on financial advice and wrap platforms continue the process towards adviser charging. The idea, though, is not to abolish commission but to prevent providers influencing the levels of such payments. There continue to be concerns that banks and other restricted advisers will fail to make their status sufficiently clear when the new rules come into force in 2012.
The Chartered Institute of Arbitrators has completed its review of the first 12 arbitration guidelines. They can be read on www.ciarb.org. The Arbitration Sub-Committee is continuing its major revision of the guidelines. So, do send in all comments however critical to me at adamsamuel@aol.com. Houston Lowry and I have taken over as co-chairman of the sub-committee. There is now a new guideline on security for costs.
The FSA has announced that it is considering a third attempt to review DISP since 2007. The re-drafting DISP group which met in the Pillars of Hercules pub in 2008 has already given it the answer! You can see the draft with or without commentary on the "Writing page" of this website.
The Redrafting COBS group finished its work on COBS 4 and 5 as ever in the Pillars of Hercules pub in Soho in a slightly alcoholic haze with new friends made and, who knows, an improved rulebook produced as a result.
The Institute of Financial Planning has adopted and updated version of its Code of Ethics after a review carried out by yours truly. I am now a member of the Institute's new Ethics Committee.
In July, I am doing two days of workshops for Infoline on complaint handling, covering DISP generally, investment cases and PPI. For booking details, e-mail me.
An financial planner may have invented a new product: how do we prevent complainants from being ex-customers? I did a review for a firm that involved taking some complaint files and reviewing everything from the client agreement to the complaint handling to find ways of keeping customers even after they have expressed dissatisfaction without breaking the complaint rules.
The US Supreme Court made a complete mess of the Stolt-Nielsen case, ruling that an arbitral tribunal exceeded jurisdiction by deciding that it could deal with a series of claims based on the same standard arbitration clause as a class action. This was in spite of the fact that the parties had entered into a separate submission agreement referring to the arbitrators the question of whether a class action was allowed under the orginal arbitration clause. The Court rightly concluded that the arbitrators erred in law in concluding that a standard clause silent on this subject allowed class-action arbitration. However, the Federal Arbitration Act does not allow for review on the merits. The only way in which one can defend the decision is on the basis that the ruling, in defying the parties' apparent agreement, was contrary to public policy. That does not really stand up in the light of the parties' submission agreement. It is also inconsistent with the House of Lords' decision in Lesotho Highlands. Policy is also not a ground for setting aside awards under the FAA. Ultimately, the Court may have been overly influenced in its decision by the basis on which it gave certiorari, namely to examine whether class action arbitration was permitted under the FAA in the absence of express party agreement. It seems to have given the right answer to the wrong question.
Stories you may have missed
The FSA finally proposes to take action against firms for mishandling complaints, requiring a past complaints review and agreeing with a number of firms a past-business review programme. Unfortunately, there are technical problems with the FSA's proposal. First, prime mortgage PPI is included when it probably should not be. Secondly, some firms may be tempted wrongly to conclude that the customer should have been recommended a regular premium contract when it was almost impossible to buy one in the unsecured loan market. Finally, one of the interest rate examples does not carry interest at the loan rate which it needs to do. There is an interesting question as to whether lenders and insurers should be held jointly liable in this area for broker sales on the basis that they were engaged in a joint enterprise.
The Financial Ombudsman Service's publication of its uphold rates shows extraordinarily high figures for High Street banks, not just for their PPI cases but also their retail banking complaints.
