EXPLANATORY NOTES

Advice to suppliers on complaints handling and the Financial Services Ombudsman

Scheme

Introduction
The Financial Services Ombudsman Scheme (“the Scheme”) is a dispute resolution scheme for
financial complaints which will operate out of the Office of Fair Trading. It is established under
new sections 21A, B and C of the Financial Supervision Act 1988 which are brought in by the
Fair Trading (Amendment) Act 2001.

The Scheme will fulfil an important role by giving individual consumers access to an
independent, speedy and informal dispute resolution service. However, the aim is not to
interfere in the normal relationship between financial firms (‘suppliers’) and their customers and
the responsibility for attempting to resolve complaints must lie, in the first instance, with the
supplier. Suppliers should be able to resolve the vast majority of customer complaints internally
and so it should only be the small proportion that remain unresolved that arrive at the Scheme.

The Financial Supervision Commission, Insurance and Pensions Authority and Office of Fair
Trading are issuing joint advice for suppliers with regard to both the Scheme and their internal
complaints procedures. The standards in the Advice are what is considered by the Office of
Fair Trading and the financial regulators to be best practice and the Ombudsman Scheme will
have regard to the Advice when considering complaints, for example as to how well suppliers
have handled particular complaints. The Advice sets voluntary standards for suppliers, however
over time their effectiveness on this basis may be reviewed. The Advice is published for the
benefit of all persons providing financial services in or from the Isle of Man.

Timetable
The Financial Services Ombudsman Scheme is expected to come into operation on 1st January
2002. Accordingly, the Advice is published with the intention of suppliers following the
standards from 1st January 2002.

Joint advice
The joint advice mainly contains general principles as regards internal complaints procedures,
dealings with and promotion of the Ombudsman Scheme and leaves suppliers free to develop
the detail themselves as appropriate for the size and nature of the firm.

The first point expects suppliers to co-operate fully with the Ombudsman Scheme, for example
with requests either from Office of Fair Trading staff or an adjudicator for information. It expects
suppliers to comply promptly with any determination made by the Scheme or agreed
settlement, ie by making prompt payment of any award or the prompt taking of steps as
directed.

Internal complaints procedures

Points 2.1, 2.2 and 2.4 set the over-arching principles for suppliers’ internal complaints handling
procedures. There are various useful sources of information on this area, such as the British
Standard on Complaints Management Systems (BS8600) and the UK Cabinet Office
publication ‘How to deal with complaints - a best practice guide’ (see www.cabinet-
office.gov.uk/servicefirst/).

Suppliers’ internal complaints handling procedures should include set time limits for:
• acknowledging complaints
• responding to complaints

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• keeping the complainant informed about the progress of an investigation if targets are going
to be missed (‘holding’ responses) and
• payment of accepted offers of redress. (See 2.3)

Suppliers can set their own time limits for acknowledgement and holding responses and
payment of redress. However, the Advice specifies that internal complaints handling should be
completed within 12 weeks and a ‘final response’ issued to complainants within this time.
Suppliers may choose to operate a two-stage (or more) procedure whereby if a first response
fails to satisfy the complainant, the complaint is referred to a more senior level. The ‘final
response’ is when the whole internal complaints handling procedure has been exhausted, the
complaint has been fully investigated and should contain a full, considered and final response
to the complaint.

In exceptional circumstances if the investigation has not yet been completed, a response
explaining why must be sent to the complainant at the end of the 12 week period. But both this
response and final responses must include details of the complainant’s right to approach the
Financial Services Ombudsman Scheme, with details of the Scheme. Leaflets on the
Ombudsman Scheme are available from the Office of Fair Trading.

Suppliers may choose to set a shorter target time for issuing final responses within the overall
limit. For example, in the UK the regulator sets a time limit of 4 weeks for suppliers to send
either a final response or a holding letter, with an overall time limit of 8 weeks applying for a
final response if it has not been sent earlier. See Table 1 for an explanatory illustration of how
the time limits can be applied.

The legislation establishing the Ombudsman Scheme sets various criteria under which
complaints can be dismissed by the Scheme or are ineligible for consideration. However, it is
for the Scheme to decide whether or not complaints are eligible for consideration. Even if a
supplier believes that a complaint will not be accepted, it must still inform the complainant of
their right to refer their complaint to the Scheme. Suppliers should not attempt to block
complainants from approaching the Scheme. Similarly, even if a supplier is offering what it
considers to be an acceptable settlement in a final response, it must still make the complainant
aware of the Ombudsman Scheme and their right to approach the Scheme.

Promotion of complaints procedures

Customers will need to know about the existence of the Ombudsman Scheme for the system to
be effective. Some level of publicity is essential to ensure that all applicable customers,
especially but not exclusively those with a complaint, are aware of the Scheme and able to
access it. Hence 3.1 expects suppliers operating in or from the Isle of Man to promote the
Ombudsman Scheme generally, as appropriate for the nature of the organisation, with the
intention of raising all customers’ general awareness of the Ombudsman Scheme. Suppliers
should indicate that they are covered by the Scheme and can use methods of their choice. For
example, notices in branches, sales offices or on websites; on documentation such as
brochures and business cards etc. Suppliers should note that the Ombudsman Scheme can
only consider complaints from private individuals. The Office of Fair Trading and regulators
have also developed a suggested wording for suppliers’ use on literature or stationery, if
required (see overleaf).

More specific and detailed information to explain a supplier’s complaints handling procedure
should also be published and this should include details of the Ombudsman Scheme. This
information can be presented in a ‘How to complain’-type leaflet and/or in terms and conditions,
policy wordings or other key customer documentation. While suppliers may choose to give this
detailed information to all customers, at the least it should be available to customers on request

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and given to customers when they make a complaint. As well as receiving the information in
the final response, complainants need to know about any independent complaints resolution
body when they make a complaint, so that they know it is worth pursuing it (so that they know
there is ‘light at the end of the tunnel’). It is in both parties’ interests that this happens, rather
than having complainants give up and remain dissatisfied.

Standard wording

If suppliers wish to refer to the Ombudsman Scheme on literature or stationery, as a method of

meeting requirement 3.1 of the Joint Guidance to Suppliers, the following wording is suggested
by the Office of Fair Trading, Insurance & Pensions Authority and Financial Supervision
Commission:

“Complaints we cannot settle can be referred to the Financial Services Ombudsman

Scheme for the Isle of Man.”

This is very similar to that of the UK for simplicity and also to aid Island firms who also operate
there. In the UK from “N2”, there is no specific wording prescribed by the Financial Services
Authority for disclosure relating to the Financial Ombudsman Service on literature or stationery.
The only applicable wording is as suggested by the Financial Ombudsman Service, which is
“Complaints we cannot settle can be referred to the Financial Ombudsman Service”. The
wording can be used either with or without the Financial Ombudsman Service logo. The
Financial Ombudsman Service’s view is that the logo has more immediate visual impact than
text alone. (See www.financial-ombudsman.org.uk for further information.)

Where it would be relevant to refer to both schemes, a suggested wording is:

“Complaints we cannot settle can be referred to the Financial Services Ombudsman Scheme
for the Isle of Man or the Financial Ombudsman Service in the UK, depending on the parties
involved.”

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Table 1: An illustration of the overall time limit and information requirements for handling
complaints
Complaint received

Supplier acknowledges receipt, enclosing a copy of its complaints procedure which includes details of the
Ombudsman Scheme, unless complaint is resolved by close of business on the next business day.

Time limit for this to be set by each supplier, for example within 5 working days of receipt

Supplier investigates complaint

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Supplier sends final response, informing Supplier sends holding letter to keep
complainant of their right to refer the complaint OR complainant informed, if investigation
to the Ombudsman Scheme, with details of the not completed within time limit for this
Scheme. stage.

Internal complaints procedure finished.

Time limit for this stage to be set by each supplier, for example within 4 weeks of receipt

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Supplier sends final response, informing Supplier sends a response explaining

complainant of their right to refer the complaint
to the Ombudsman Scheme, with details of the
Scheme.
Internal complaints procedure finished.
OR why the supplier is not in a position to
issue a final response, when it expects to
be able to issue a final response and
informing complainant of their right to
refer the complaint to the Ombudsman
Scheme, with details of the Scheme.

Set time limit: 12 weeks after receipt of complaint.