FOS wants to be seen as an open and transparent organisation. To date, it has sought to achieve this by publishing details of the numbers and outcomes of cases it receives, analysed according to the different types of products, financial businesses, and financial sectors involved. However, it had not gone as far as publishing complaints information on individual financial businesses. This is set to change if these proposals are implemented.
The Hunt Review and subsequent report of April 2008 reviewed the work of FOS and highlighted the need for greater transparency. The report emphasised that information about the complaints-handling performance of businesses is a factor that clients may wish to take into account when purchasing a product. The report concluded that there was no legitimate justification for withholding this information. Following the Hunt report, the FOS non-executive board approved the decision to publish this information for certain financial businesses. FOS has therefore published this paper to explain what information it intends to publish and the way in which it intends to publish it.
The paper sets out why it considers it to be in the public interest for this information to be published. First, transparency should be encouraged unless there is good reason for non-disclosure, and the Hunt report found that no such reason existed. Secondly, the publication of the information has two distinct benefits: it will help consumers in their purchasing decision; and it will incentivise the business to improve its complaint-handling as it will be aware that it is in the spotlight. It also notes that where similar cases are brought by consumers in courts, outcomes are published.
The paper explains the additional impetus for publishing this information: FSA is proposing to publish similar information for firms it regulates (see the discussion paper DP08/3), as are equivalent bodies in several other jurisdictions (such as Spain and Poland). FOS is working with the FSA on this matter, in particular as regards the format and content of the data.
The proposals: What will be published and how
- FOS proposes to publish data on consumer complaints relating to individual businesses that become ‘full complaints’ only, thus excluding cases that FOS considers outside its jurisdiction, where any of the complaint dismissal grounds apply, or where the financial business itself has not yet had the opportunity to deal with the case. FOS intends to publish detail on the number of such complaints and their outcomes in relation to the individual businesses.
- The information published will simply show the percentage of cases where FOS has reviewed the complaint and the outcome has been changed in favour of the consumer. It will not provide detail on the reason for such a change (whether the business formed a different view on the merits of the case or FOS considered the business’s offer of redress was inappropriate or inadequate). Furthermore, FOS will not publish detail on the nature of the change (whether FOS decided on a small/ large change to the compensation award). Such submissions, FOS says, add an element of subjectivity to the information that could be controversial.
- The financial businesses to which these publication rules will apply will be those that have most impact on FOS’ service. FOS will set a threshold relating to the number of cases that a business has generated in a six-month period; it is proposing to limit publication to businesses with at least 30 new cases and 30 closed cases in the relevant six-month period. The aim is to strike an appropriate balance between the number of businesses covered and the resources available to collate and publish the data.
- Some businesses operate under various trading names and so the proposals suggest that the information published will identify any other brands that the entity uses. In addition, the information will identify the rest of the group company to which the information relates. Where a group includes some businesses with case numbers above the threshold and some with case numbers below the threshold, FOS is also proposing to publish the detail for the group business below the threshold so as to give a full picture for the group. The information will be audited before publication to ensure that the information is verified and accurate.
- The information will be published on a six-monthly basis to tie in with FSA’s biannual publication of complaints data.
- The information will be published via the internet.
This proposal highlights the extent to which the “confidentiality of information” pendulum has now swung towards a presumption that disclosure should be made unless there is a clear case against. A key feature of FOS was, unlike the courts, that its service was confidential and it did not publish the names of businesses or consumers whose complaints it handled.
Firms should evaluate these proposals against two associated developments. The first is FSA’s proposals for greater transparency, which the industry is strenuously resisting. The second is the way in which the Information Commissioner is interpreting the Freedom of Information Act to require FSA to disclose certain information that is not covered by statutory confidentiality.
The key concern regarding the FOS proposals is the risk of misinterpretation. In principle, information of this kind should only be published when it will be useful to investors, and in a form that they can apply to their decision-making. But FOS has produced no evidence to substantiate the premise that complaints-handling data is at all relevant to the decision to purchase a product, especially when it is presented as an unrefined percentage. Furthermore, to tell an investor that FOS received 100 complaints relating to Firm A and overturned 30% but 20 relating to Firm B of which it overturned 50% is only superficially informative. Does this mean that Firm A is worse because it receives more complaints, or Firm B because it seems to handle them less fairly? In fact it may tell you very little because Firm A may be 100 times larger than Firm B and the sales may be of wholly different products made many years apart. In either case such backwards-looking data is unrepresentative of issues that concern a new customer at the point of sale, such as cost, expenses, risk profile and suitability and may therefore actually distract the investor from what really matters.
FOS invites comments on its proposals. The deadline for responses is 24 December 2008. FOS is aiming to begin publishing this information in the second half of 2009.
To view the full text of the paper, please click here.