FCA statement on BSPS consumer redress scheme
The FCA has announced that it expects to consult by the end of March 2022 on a “s404 redress scheme” in relation to advice given to former members of the British Steel Pension Scheme from 1 March 2017 to 31 March 2018. The FCA sent a “Dear CEO” letter on 22 December 2021 to firms detailing the interim steps firms should stake prior to the formal launch of the scheme.
What is a s404 scheme?
Section 404 of the Financial Services and Markets Act 2000 (“FSMA”) enables the FCA to make rules requiring firms to establish and operate consumer redress schemes.
A consumer redress scheme is a set of rules under which a firm is required to take one or more of the following steps:
- investigate whether, on or after a specific date, it has failed to comply with particular requirements that are applicable to an activity it has been carrying on;
- determine whether the failure has caused (or may cause) loss or damage to consumers;
- determine what the redress should be in respect of the failure; and make the redress to the consumers.
How will firms operate under the scheme?
Firms will be responsible for investigating individual cases, within the framework set out by the FCA. The FCA will have a number of options when formulating a scheme.
For example, the FCA could:
- require firms to undertake a proactive file review of all cases falling within the period covered by the scheme;
- require firms to contact their customers individually to ask whether they wish their cases to be investigated under the scheme and only investigate the cases of those customers who opt-in;
- require firms to publicise the existence of the scheme (e.g. through newspaper advertisements) and only investigate the cases of those customers who opt-in; or
- publicise the existence of the scheme through an FCA publicity campaign and require firms to investigate the cases of those customers who subsequently opt-in.
Role of the Financial Ombudsman Service
There are four key scenarios which will involve the ombudsman service dealing with complaints about issues that fall, or may fall, within the scope of a consumer redress scheme:
- where the ombudsman service receives complaints while a scheme is operating that fall within its scope but the time limit for the firm to deal with cases under the scheme has not expired. In this situation, the ombudsman service proposes (subject to consultation on changes to DISP) to refer the complaint back to the firm to be dealt with in accordance with the scheme.
- where the ombudsman service receives complaints about the outcome of a firm’s investigation under a scheme. If the ombudsman service considers that the firm has reviewed the subject matter of the complaint and issued a “redress determination” in accordance with the scheme, it is proposed (subject to consultation on changes to DISP) that the ombudsman service may dismiss the complaint without considering its merits
- where the ombudsman service receives a complaint once a scheme has ceased to operate. This situation would cover cases such as where a firm had failed to undertake or complete an investigation under a scheme within the period in which it was operating. In this scenario, the ombudsman service would be required to deal with complaints by applying the scheme.
- where the ombudsman service receives complaints or is considering complaints when the FCA is consulting on a scheme, but the scheme is not yet in place. A scheme must be established by the FCA in accordance with the FCA’s rule-making processes, including consultation and cost-benefit analysis. In these situations, the ombudsman service will consider whether or not to place a hold on those complaints that may fall within the scope of the scheme (in line with normal operational practice).
Role of the Financial Services Compensation Scheme
The FSCS will consider claims that fall within the scope of a consumer redress scheme in accordance with the scheme. However, the FSCS would have discretion to depart from the terms of the scheme where it considered it essential in order to provide the claimant with fair compensation – our experience is that FSCS does depart from rules and challenging the FSCS on assumptions is not straightforward.
How we can help
Congruent has expertise in the assessment of complaints under a formal redress scheme and are able to assist firms seeking to perform compliance assessments and redress calculations. Our Congruent CalculationTM platform provides clients with a web-based calculation portal for users who require redress to be determined according to FCA FG17/9 (Guidance for firms on how to calculate redress for unsuitable defined benefit pension transfers).
