The CeMAP paper one syllabus is divided into three parts and each part is allocated an indicative weighting as follows:
Part (a) Legislation, regulation, enforcement and compliance: 40%
Part (b) Legal, taxation and economic factors: 30%
Part (c) Products, services and providers: 30%.
The allocation of the nine units in the IFS' study manual into three sections reflects the above division of the syllabus as can be seen from the contents page of the manual. One of the effects of this division is that a large number of questions in the exam paper will be set on part (a) of the syllabus, the majority of which is covered by unit two of the study manual. Much of the contents of this unit, entitled 'Regulation of the financial services industry', will be unfamiliar to mortgage advisers and intermediaries unless they are working in a sector currently regulated by the FSA. Consequently, a programme of conscientious study is required to understand the contents of unit two. One of the topics covered in unit two is that of complaints and compensation which is a popular topic for questions.
New rules on complaint handling arrangements were introduced by the Financial Services and Markets Act 2000 which consolidated and enhanced the arrangements under the previous regulatory regime. The rules require firms to deal properly and promptly with consumer complaints. The key requirements for firms' complaints procedures are that firms must have appropriate and effective complaints handling procedures of which consumers must be made aware. Firms should aim to resolve complaints within eight weeks and complainants should be told of their right to take their complaint to the Financial Ombudsman Service if they are not satisfied with the firm's decision. Firms are required to report to the FSA on their complaint-handling on a six-monthly basis.
The FOS has three divisions – banking and loans, insurance and investment. The service is free for customers and is open to private individuals and small businesses i.e. those with an annual turnover of less than £1m. It is funded by firms who are members of the FOS and membership is compulsory for all firms authorised under the FSMA 2000. As with most ombudsman schemes, customers who have a complaint must first complain to the firm itself. The FOS will only become involved once a firm's complaints procedures have been exhausted without customer satisfaction. The FOS reserves the right to dismiss without consideration complaints it considers 'frivolous or vexatious'.
The FOS can make awards of up to £100,000. The aim of the awards is not to punish firms but to put customers back in the position they would have been in if things had not gone wrong. Complaints must be made to the FOS within six months of the customer receiving a letter from the firm setting out its final decision on the complaint. This is sometimes known as the 'deadlock letter'. Ombudsman decisions and awards are binding on firms but not on customers who are free to go court. The FOS' initial approach will often be to attempt mediation. Only if the parties do not agree at this stage will a formal investigation commence.
Certain complaints are outside the scope of the FOS. These include most complaints about general insurance and mortgage brokers, occupational pension schemes, firms' business decisions e.g. regarding interest rates and premium levels and the performance of investments. General insurance and mortgage brokers will come within the FOS regime when general insurance and mortgages become regulated from January 2005 and October 2004 respectively.
The Mortgage Code Arbitration Scheme considers complaints from customers of mortgage intermediaries or customers of any member of the Council of Mortgage Lenders that is not also a member of the FOS in respect of alleged breaches of the Mortgage Code. It is a requirement of the Mortgage Code that a notice must be displayed prominently in all branches showing to which complaints scheme the lender or intermediary belongs. Next week's column will consider some of the main points of the Mortgage Code Arbitration Scheme and then move on to provide an overview of the regulation of pensions.