Part Xvi: the Ombudsman Scheme
440.This Part of the Act provides for the creation of a single, compulsory ombudsman scheme for the resolution of disputes between authorised firms and their customers. It provides for the detailed operation of the scheme to be determined largely by rules made by the Authority on which it is required to consult in accordance with the requirements under Part X.
Section 225: The scheme and the scheme operator
441.This section makes clear that the object of the scheme is to resolve disputes involving consumers quickly and with minimum formality. The operator of the scheme must be a body corporate.
Section 226: Compulsory jurisdiction
442.This section requires firms authorised by the Authority to submit to the jurisdiction of the scheme. The scheme’s compulsory jurisdiction may only be applied to persons who were authorised at the time the activity to which the complaint relates was carried out, and the rules must have been in force at that time. The Authority is to make rules determining which activities of authorised persons fall within the compulsory jurisdiction. These activities must either be regulated activities as specified by the Treasury under section 22 or other activities which are not regulated, but could be made regulated activities under that section. The Authority is free not to include certain activities, for example kinds of professional business where it is unlikely that retail customers would ever be involved.
443.If an activity is included in the compulsory jurisdiction of the scheme, the ombudsman can consider all disputes arising from the carrying on of that activity by the authorised person. For example, were accepting deposits specified as an activity covered by the compulsory jurisdiction of the scheme, the ombudsman could consider all disputes arising from the operation of a bank account, such as the withdrawal of money from a cash machine, or a stopped cheque.
444.The section also sets the circumstances in which a complaint can be dealt with: namely, that the complainant meets the relevant eligibility criteria (set by the Authority) and has asked the ombudsman to consider the case. The scheme is not able to deal with complaints made by authorised persons, except in circumstances specified in the rules.
Section 227: Voluntary jurisdiction
445.Firms can join the ombudsman scheme, on a voluntary basis, under the voluntary jurisdiction where they are not authorised by the Authority or in respect of activities falling outside the scope of the compulsory jurisdiction. However, the scheme’s voluntary jurisdiction rules can only relate to activities which are subject, or could be made subject, to the compulsory jurisdiction rules. The voluntary jurisdiction can be applied to authorised persons where a complaint relates to an activity which could be, but has not been, made subject to compulsory jurisdiction rules.
446.Voluntary jurisdiction rules can be made by the scheme operator with the approval of the Authority. The rules will also define which complainants are eligible.
Section 228: Determination under the compulsory jurisdiction
447.The ombudsman will make a decision about the complaint on the basis of what he considers is fair and reasonable in the circumstances. The scheme operator has the power under paragraph 14 of Schedule 17 to specify the matters that can be taken into account when determining what is fair and reasonable. The ombudsman must make a written statement of his reasons for the decision, and must also require the claimant to accept or reject the decision by a specified date. If the complainant accepts the ombudsman’s decision, then it is binding on both the complainant and the respondent.
Section 229: Awards
448.If a complaint under the compulsory jurisdiction is determined in favour of the complainant, the respondent may be ordered to pay compensation up to a maximum limit which may be set by the Authority. The limit may be different for different kinds of complaint. The Authority may specify a particular limit for compensation in respect of non-financial loss or damage. The ombudsman can only make a binding award up to the limit set by the Authority, but he may recommend a greater amount as fair compensation. The respondent may also be ordered to take steps to rectify the matter complained of, and this can be enforced through the courts by the complainant if necessary.
Section 230: Costs
449.This section allows the scheme operator to make rules concerning the costs which can be awarded by the ombudsman. These rules are subject to certain constraints. Where a complaint is settled in favour of the complainant, the rules can allow the firm concerned to be required to meet the costs of both the complainant and the scheme operator. A complainant could only ever be required to meet the costs of the scheme, and then only if the scheme operator had made rules to allow for such awards and the ombudsman believed that the complainant’s conduct has been improper or unreasonable, or they had been responsible for an unreasonable delay. The section also makes provision for recovery of costs by the scheme operator.
Section 231: Ombudsman’s power to require information
450.The efficient settlement of complaints under the compulsory jurisdiction will sometimes require the scheme to obtain information from the parties to the dispute. This section provides the scheme operator with powers to require parties to the complaint to provide specified information which it considers necessary for the fair determination of the complaint. It is not expected that these powers will be used on a routine basis. The Authority will also have powers to make rules requiring authorised persons to co-operate with the scheme. It will be in the interests of the complainant to co-operate.
Section 232: Powers of court where information required
451.This section provides that, if a person fails to comply with a requirement to provide information made under section 231, the matter may be certified to the court, which may deal with the person as if they were in contempt.
Section 233: Data protection
452.This section inserts new subsection (4A) into section 31 of the Data Protection Act 1998. This is needed to ensure that the scheme operator does not have to disclose information it has obtained when considering a complaint brought under the ombudsman scheme if disclosure would prejudice the performance of its functions.
Section 234: Industry funding
453.This section provides for the Authority to be able to levy fees on authorised persons to meet both the costs of establishing the scheme and the costs of running the compulsory jurisdiction. The costs of the voluntary jurisdiction will be met by fees set as part of the voluntary jurisdiction rules.