Skip to content
Institute of Economic Affairs

Institute of Economic Affairs

Institute of Economic Affairs

Monday May 16, 2022
  • twitter
  • facebook
  • rss
  • Institute of Economic Affairs
  • Home
  • About
  • Staff
  • Jobs
  • Epicenter
  • Contact Us
  • twitter
  • facebook
  • rss
  • Blog
  • Film
  • Coronavirus
  • Research
    • Publications
    • Economic Affairs
    • EA Magazine
    • Brexit Unit
    • Int. Trade & Competition Unit
    • SMPC
    • Paragon Initiative
  • Media
    • Media Coverage
    • Press Releases
    • Media Enquiries
    • About IEA Comms
  • Students
    • Internships
    • Events and Conferences
    • Essay Competition
    • Student Resources
    • IEA Budget Challenge
    • Economics101
  • Events
    • Forthcoming Events
    • Past Events
  • Donate
    • Donate Now
    • Donate Monthly
    • IEA Patreon
    • Other Ways to Donate
    • Legacy Gift
    • Donate from USA
    • Contact Us
  • Home
  • About
  • Staff
  • Jobs
  • Epicenter
  • Contact Us

Who Regulates the Regulators? The Financial Ombudsman Service

Victoria Hewson
31 March 2021
Institute of Economic Affairs > Publications > Policies > Regulation
Summary

  • While not formally a regulator in the strict sense, the Financial Ombudsman Service (FOS) exercises de facto regulatory powers in retail financial services, as its rules and determinations direct the behaviours of firms.

  • While intended to be independent, the FOS has a close relationship with the Financial Conduct Authority. Ombudsmen, however, have considerable discretion to make determinations of complaints brought to them based on what they consider to be fair and reasonable in the circumstances. While required to take law, regulation and good industry practice into account, they are not bound to follow them. This has been described as a disapplication of the rule of law.

  • The FOS has expanded its role from resolving complaints to ‘preventing detriment’, which seems to overstep its statutory function. The formal expansion of its jurisdiction into small and medium sized business complaints and the increase in the limit of the amount of compensation it can award seem likely to further increase the complexity of its cases, calling into question the fairness of decisions and further highlighting the need for greater transparency on internal decision-making policies. Increasing complexity and the higher amounts of financial compensation that may be awarded in some cases also suggest that there should be a review of the charging structure for FOS cases.

  • While some form of alternative dispute resolution is necessary for consumers in dispute with financial service providers, there are signs that the way the FOS operates has introduced unfairness and uncertainty for firms (especially small and mid-market providers). There is evidence of anti-competitive effects in lending and advice markets, and limited evidence of improvements in consumer outcomes in financial services generally.

  • The FCA (pursuant to its statutory objective of the promotion of competition) should undertake an investigation into the effect on competition of the FOS and its decisions.

  • A more formal channel for dispute resolution in financial cases involving small and medium sized businesses (previously recommended by the Treasury Committee of the House of Commons) should be considered.


Fullscreen Mode


Victoria Hewson
  • twitter
  • email

Head of Regulatory Affairs

Victoria joined the IEA’s International Trade and Competition Unit in Spring 2018. She is a lawyer and practiced for 12 years in the fields of technology and financial services, before joining the Legatum Institute Special Trade Commission to focus on trade and regulatory policy. She has published work on the implications and opportunities of Brexit in financial services and movement of goods and the issues in connection with the Irish border. Before entering the legal profession Victoria worked for Procter & Gamble in the UK and Germany.
Download
Share
GET the full report here
Download
READ MORE
PRESS RELEASE

SIGN UP FOR IEA EMAILS

Share this Story

previousPublicationsA safer bet: Gambling and the risks of over-regulationChristopher Snowdon10 March 2021
nextResearchShadow Monetary Policy Committee votes seven votes to two to hold Bank Rate in May13 April 2021
latestPublicationsThe Northern Ireland Protocol: Current position and ways forwardVictoria Hewson16 May 2022
GET the full report here
Download
READ MORE
PRESS RELEASE
previous
Publications

A safer bet: Gambling and the risks of over-regulation

10 March 2021
next
Research

Shadow Monetary Policy Committee votes seven votes to two to hold Bank Rate in May

31 March 2021
latest
Publications

The Northern Ireland Protocol: Current position and ways forward

16 May 2022
Institute of Economic Affairs
BE PART OF THE IEA TODAY
  • Donate
  • Like
  • Follow
  • Watch

NEWSLETTER SIGN UP

Privacy Policy
© Institute of Economic Affairs
REGISTERED IN ENGLAND 755502, CHARITY NO. CC/235 351, LIMITED BY GUARANTEE
×
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL the cookies. However you may visit Cookie Settings to provide a controlled consent.
Cookie settingsACCEPT
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary
Always Enabled

Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.

Advertisement

Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.

Performance

Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.

Analytics

Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.

Functional

Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.

Uncategorized

Undefined cookies are those that are being analyzed and have not been classified into a category as yet.

Save & Accept
Powered by CookieYes