About Innovate Finance

Innovate Finance is the independent industry body that represents and advances the global FinTech community in the UK. Innovate Finance’s mission is to accelerate the UK's leading role in the financial services sector by directly supporting the next generation of technology-led innovators. 

The UK FinTech sector encompasses businesses from seed-stage start-ups to global financial institutions, illustrating the change that is occurring across the financial services industry. Since its inception in the era following the Global Financial Crisis of 2008, FinTech has been synonymous with delivering transparency, innovation and inclusivity to financial services. As well as creating new businesses and new jobs, it has fundamentally changed the way in which consumers and businesses are able to access finance. 

Introduction and summary of key points

Innovate Finance welcomes the opportunity to respond to the Financial Ombudsman Service’s (FOS) Consultation Paper on temporary changes to outcome reporting in its business-specific complaints data. 

Our members recognise that fair and effective forms of alternative dispute resolution in the financial services sector are necessary and extremely important for ensuring good consumer outcomes. We welcome the proactive efforts on the part of FOS to trial an amendment to its outcome reporting in order to incentivise industry to settle cases pragmatically and at an earlier stage without the need for a full investigation by an investigator or an ombudsman.

Our members are broadly supportive of the proposed amendment to outcome reporting articulated by the FOS. A summary of our key recommendations is below:

• To allow firms to better support the FOS’s objectives and outcomes underpinning its proposals, we recommend that firms be granted 21 days in which to review complaints – this will encourage more proactive and pragmatic settlement offers by firms. 
• To ensure additional transparency and help facilitate the assessment process for firms, we recommend that the FOS publish a list of requirements for cases to qualify for proactive redress. 
• We also urge the FOS to review the case fee structure in light of these proposals to make case fees more proportionate for the increased number of cases that are expected to be actively settled.  

In preparing this high-level response, we have engaged with a cross-section of our membership base, including start-up and scale-up banks and buy-now, pay-later (BNPL) providers.

We would be pleased to discuss our response with colleagues from the FOS and / or facilitate discussions with our members.

Questions and responses

Q1: Do you agree or disagree with this proposal?

Our members broadly agree with the proposed amendment to outcome reporting (please see suggested amendments in response to question two).

Q2: Are there any amendments you would suggest we make to this proposal?

Time limit for business offers to settle complaints

Members note the accepted business practice for responses is 21 working days, which usually provides enough time for a business to ensure that it has clearly and thoroughly reviewed all necessary factors before preparing a response or offer. 

Our members would expect the FOS to offer the industry standard of 21 working days for firms to make a proactive offer to settle, rather than the proposed 14 days. This additional time to review will help firms settle more complaints proactively and pragmatically at an earlier stage, and will still bring closure to affected complainants in a timely manner.

Q3: To what extent do you agree that the Financial Ombudsman Service should review the fairness of an offer made under this process?

Our members are supportive of the FOS reviewing the fairness of offers made under this new process. 

Q4: Are there any additional risks towards fairness that haven’t been identified, or mitigations that we should consider putting in place, should this proposal be implemented?

Our members have not identified any additional risks in regards to fairness. There are no further mitigations the FOS should consider putting in place before the implementation of the proposal. 

Q5: To what extent do you agree or disagree with our assessment of the risks to data integrity and transparency?

Our members agree with the assessment of the risks related to data integrity and transparency. Our members also agree that a sufficient number of complaints will be resolved as either ‘change in outcome’ or ‘no change in outcome’ to maintain the integrity of the data. 

Q6: Are there any additional mitigations for this risk that we should consider putting in place, should the proposal be implemented?

In order to ensure additional transparency and facilitate the assessment process, our members recommend that the FOS shares a list of requirements (a ‘checklist’) for a case to qualify for proactive redress, i.e. threshold, turnover points (such as, for example, lack of negligence), age of the case and other criteria. While each case should always be assessed on an individual basis, having such guidance would help industry to correctly identify the cases which would fall under this new category and ensure that they are captured and processed in a timely manner. 

Q7: Do you have any other comments or thoughts about the proposals set out in this consultation paper?

Review of case fee structure

Our members are supportive of these proposals complementing the FOS’s long-term commitment to changes to its funding model and wish to see a review of the case fee structure considering the lower effort and resources which would be required by the FOS to process the cases that will be proactively settled (as no in-depth investigation by the FOS is needed.

Where firms do make a proactive offer and this is accepted by the customer, our members would expect the case fee to be adjusted to reflect the lower level of FOS resource applied to such cases. This is especially important where the FOS case fee is disproportionate to the average order value of a transaction, such as in the BNPL sector. Alongside a more pragmatic approach to reporting, a reduced case fee that reflects the level of FOS engagement on the case would incentivise firms to engage proactively and constructively with the FOS to ensure that customers are treated fairly and that cases that genuinely require FOS support are prioritised. This is especially the case for firms and sectors that are not currently within scope of the FOS jurisdiction, such as BNPL providers.

Challenges posed by the consultation period

We are grateful to FOS colleagues for granting us a short extension to the consultation submission deadline. Notwithstanding this extension, our start-up and scale-up FinTech members have flagged up the difficulty in responding to this consultation given the extremely short time period allocated.

The Ombudsman’s consultation period coincides with an extremely high volume of other regulatory consultation and discussion papers that are running concurrently. This includes but is not limited to papers on the following topics: Prudential Regulatory Authority and Bank of England consultation on Basel 3.1 (CP16/22); HM Treasury’s consultation on regulation of Buy-Now, Pay-Later; HM Treasury’s consultation on reform of the Consumer Credit Act 1974; and HM Treasury’s consultation on review of the Payment Services Regulations 2017.

We also note that the regulatory initiatives grid (due to have been published in November 2022) — which was created with the intention to give industry a forward look of regulatory policy changes and assist with workload planning associated with regulatory change — was only published on 28 February, a week before this consultation was published.

The consultation period also cut across the Holi festival (problematic from a Diversity, Equity and Inclusion standpoint with colleagues taking leave to observe the holidays). 

Many of our start-up and scale-up members’ public policy and regulatory affairs teams are a ‘one-person band’ with limited capacity. So, there is a risk that the voice of the FinTech community is not represented in these important discussions referenced above. We would urge the FOS and other policy makers to give consideration to the design and timing of future consultations, so that they allow a diverse range of stakeholders to feedback views.