Anger as FSA plans to ditch complaints procedure

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The Independent Online

The Financial Services Authority is set to abandon rules that require financial companies to respond to customer complaints and disputes within a fixed period.

In particular, firms would no longer have to acknowledge receipt of a complaint within five working days.

Instead they would simply be asked to respond "promptly". The requirement to send a letter after four weeks to tell the customer how the complaint is progressing - and another alert after eight weeks that the Financial Ombudsman Service (FOS) can be contacted to seek a resolution in case of being dissatisfied - could also be scrapped.

The City regulator confirmed that a review of the disputes and complaints process is taking place as part of its move further towards light-touch "principles-based" regulation (PBR).

It is trying to slim a rule book that has grown to almost unmanageable proportions as different areas of the financial markets come within its remit, and make business guidelines less prescriptive.

The FSA, led by John Tiner, is wrestling with European directives, particularly "Mifid" - the Markets in Financial Instruments Directive - that comes into force on 1 November 2007.

The idea is to build a single market in financial services across the EU, allowing, say, ordinary investors to buy German investment funds in Italy.

The ABI insurers' trade body confirmed that it had been in discussion with the FSA about relaxation of the rules.

It will publish its own "good practice" guide in the next few days which it hopes will provide the basis for a new set of FSA-endorsed guidelines instead of the current tightly defined approach to complaints handling.

The FSA would not comment on what "promptly" might mean.

Consumer bodies were horrified at what the rule changes could mean. "'Respond promptly' could mean anything," said a spokesman for Which?, the consumer group. "When we have been investigating endowment mis-selling complaints, the one thing that consumers were pleased about was that there were precise time constraints on each step of the process."

This gave them a good idea of where they stood, and when they could go to the Ombudsman.

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