Clause 79 - Arrangements for the investigation of complaints
Financial Services Bill
Christopher Leslie (Nottingham East, Labour)
I do not know whether it might be possible for the Government to consider taking a fresh look at the programme motion and to set aside some more sittings, because I am not sure that the Bill has been scrutinised sufficiently. [Hon. Members: “Hear, hear.”] I am glad that there is some support from all parties for such consideration. Perhaps the usual channels can discuss that possibility.
The clause takes us to part 6 of the Bill relating to the investigation of complaints against regulators. It establishes arrangements that the regulator must take to ensure that there is a proper complaints scheme for the investigation of complaints in connection with the exercise or failure to exercise any of the non-legislative functions of the Prudential Regulation Authority or the Financial Conduct Authority.
We shall discuss under later clauses what is or what is not a legislative function of the regulators, but it is important to bear in mind the arrangements as they currently exist because the Financial Services and Markets Act 2000, the legislation under which the regulatory arrangements were established, had within it a general provision—not massively dissimilar to the clause—whereby arrangements need to be made for the investigation of complaints. Under secondary legislation, the Financial Services Authority subsequently via orders tabled by Ministers created the quango, the Office of the Complaints Commissioner. It was introduced with effect from 3 September 2001, and it is a process that has obviously been going for more than a decade.
In the first instance, complaints from affected parties who might consider that there was failure of the regulators or a breach of their duties have to be made to the regulators themselves. The FSA was the recipient of the initial complaints and had the opportunity to look into them, and that is the usual practice in respect of public bodies. However, if there were a sense in which the complainants do not consider that the complaint had been thoroughly or adequately investigated, they have the option to pass it on for investigation by the Office of the Complaints Commissioner.
The commissioner does not consider the complaints in isolation, but looks at the issues under what is known as a complaints scheme, which is a set of principles and rules that govern the processology of how a complaint is pursued and the issues within it. We are often asked about how constituents can complain to public bodies and, from time to time, we find that there are serious breaches of duty by public bodies and, as Members of Parliament, we can write to those bodies and let them know our views, having made an initial appraisal of the case. On other occasions we make those complaints through the parliamentary ombudsman system, and I have some specific questions on how that overlaps with the Office of the Complaints Commissioner and the new complaints procedures in clause 79.
Now and then, there are vexatious or frivolous complaints. It is a pity, but sometimes individuals are simply dissatisfied with a decision and have a grievance about its outcome. They may decide to lodge a complaint about an administrative or process failing rather than lodge their views against the decision. I presume that the Office of the Complaints Commissioner in the complaints scheme has managed to set up systems to filter vexatious, frivolous complaints from genuine ones. The Bill does not set out precisely how such a system will be framed in relation to the new complaints scheme and arrangements.
Currently, the commissioner can consider complaints about how the FSA has carried out or failed to carry out its role under FSMA. However, complaints about the predecessor bodies covered by previous legislation are considered under the transitional scheme. That is important, because when FSMA was introduced, the transitional scheme was set up to ensure that complaints that had been launched under the old regime did not fall through the gap and that there would be opportunities to pick up on issues that arose from them. We have a series of questions about how complaints will be picked up in relation to the new scheme, because the system might become more complex.
At present, the commissioner does not generally investigate complaints unless the FSA has had an opportunity to do so, but he can investigate before that in exceptional circumstances. Will the Minister tell us what those exceptional circumstances are and whether the same approach will be taken in the new complaints process? The complaints commissioner currently investigates the complaint and issues a preliminary report to both the complainant and the FSA, which may then make further submissions. On receipt of such submissions, the commissioner issues the final analysis and publishes it in an anonymised format and, I am glad to say, on a website, which is accessible to many people.
Complainants who complain to the complaints commissioner must be mindful that particular complaints are excluded from the complaints scheme, and that complaints payments are expressly unavailable for complaints investigated under the transitional scheme. That is important, because we will discuss provisions later in the Bill relating to how compensatory payments are made. In the transition to FSMA, compensatory payments were not made. Presumably there will be arrangements to capture complaints in the transition to the new arrangements, so that they do not fall through the gap between the existing and the new system. I hope that appropriate compensatory payments will not be nullified and made invalid, as appears to have been happened in the old transitional scheme. Individuals whose complaints processes are being explored now need to know what the situation will be.
It is vital that the new regulators can respond to complaints about their conduct, not only to ensure that they are held to account for wrongdoing or malpractice, but to ensure that there is direct public accountability. We welcome the Minister’s concession in response to the pre-legislative scrutiny report. In paragraph 341, concerns were expressed about the initial draft of the Bill, which had at first set out the possibility that the FCA investigator would be required to be independent and would have to have their appointment approved by the Treasury, as is the case with the Office of the Complaints Commissioner at present. Under the original draft of the Bill, the PRA was not required to have an appointment from outside the Bank of England—obviously, because it is subsumed within the Bank—or an appointment approved by the Treasury, and the Government took that into account. As a consequence, they agreed to give the PRA and the FCA the same structure for complaints, and that is a welcome change.
The pre-legislative scrutiny process is important. Given that this is our last sitting, Mr Leigh, and we do not have members of the pre-legislative scrutiny Committee here, I want to pay tribute to the members of that Committee. I thank them for their hard work and diligence in making recommendations. This is an example of one way in which their work has been adopted in the Bill. It is to their credit that they made this particular suggestion.
Clause 79 provides for an independent scheme in which regulators, including the PRA, appoint an independent investigator. That is to be welcomed. It is right that the investigator is approved or can be dismissed by the Treasury. I have asked the Minister questions about the transition of existing arrangements. On the new arrangements, why have the Government decided to leave details of the establishment of the complaints arrangements to the regulators rather than specifying in a little more detail, perhaps in a schedule to the Bill or a schedule to clause 79, specific ways in which the complaints scheme might work? They seem to have delegated a considerable amount to the regulators themselves. Perhaps it was a failing of the FSMA legislation in 2000. If we are going to prove to outside parties that a particular scheme or complaints arrangement is genuinely independent and free from prejudice or bias, it is normally preferable that the complaints processes are free-standing and have a degree of separation from the body to which the complaints are being lodged. My concern is that allowing the regulators to construct their own complaints arrangements may give rise to a perception—not necessarily true—that the complaints arrangements have been biased in favour of the regulator as opposed to the complainant. That is a concern that some people might have.