I beg to move amendment No. 29, in schedule 2, page 60, line 41, at end insert—
'( ) Consumer credit rules under sub-paragraph (3) may authorise the scheme operator to dispense with or modify the application of such rules in particular cases where the scheme operator—
(a) considers it appropriate to do so; and
(b) is satisfied that the specified conditions (if any) are met.'.
Before complaints are dealt with by the FOS, firms are allowed time to resolve them directly; most complaints are resolved in that way. It is, however, necessary that firms deal with complaints expeditiously, and the FOS will have powers to set rules for that purpose.
There will be occasions when it is appropriate for a firm to have longer to resolve a complaint or a particular type of complaint, and the amendment will give the FOS the power to waive the rules when appropriate. An example of such a situation would be when the FOS is dealing with a case that has wider implications. Firms will be allowed longer to respond to similar complaints so that the FOS can make a decision on the case with wider implications first, and firms will then be able to respond to complaints in line with the FOS decision. I hope that the Committee will accept that explanation and support the amendment.
Amendment agreed to.
Question proposed, That this schedule, as amended, be the Second schedule to the Bill.
The schedule will require the FOS to make procedural rules for the operation of the consumer credit jurisdiction. The rules must set down a time limit within which complaints can be referred to ADR, which can be extended only by an ombudsman. The FOS can also require all holders of standard licences to establish and maintain internal complaints handling procedures, and it can make rules to say that a complaint will not be dealt with until the consumer has exhausted those procedures.
Within the rules, the FOS will set out the process to be followed for the reference of complaints, their investigation, their consideration and their determination by an ombudsman. The FOS will be able to dismiss frivolous or vexatious complaints and provide that, in the early stages, the complaint can be handled by a member of FOS staff other than the ombudsman.
The schedule enables the FOS to make rules specifying the fees that licensees must pay for the ADR scheme and provides that the payment of any compensation awarded by the ombudsman may be enforced through a court. It also sets out the procedure that the FOS must follow when making, amending or revoking any rules. The FOS is required to hold a public consultation before making any rules. Before the rules can be made final, they must be approved by the Financial Services Authority. The FOS must also take steps to make the approved rules available to the public. Finally, new paragraph 16F sets out the steps the FOS must take to verify the rules.
The schedule is necessary to ensure that the FOS rules and procedures are clear and comprehensive. It allows the FOS to make the rules it needs to ensure the ADR scheme is as effective and transparent as possible for both consumers and business.
I would be grateful for a couple of points of clarification.
First, the fee section in new paragraph 16C states:
''Consumer credit rules may require a respondent to pay to the scheme operator such fees as may be specified in the rules.''
Can the Minister make it more clear what those fees will be for? Will they be penalties or fines? What will they be for and why will people be paying those fees to the scheme operator?
Secondly, the paragraph on procedure for consumer credit rules, new paragraph 16E, reads:
''If the scheme operator makes any consumer credit rules, it must give a copy of the them to the Authority without delay.''
What does the Minister mean by the reference to making consumer credit rules? There has been a lot of debate and discussion as the Bill has gone through Committee, and that may be the clarification that we have all sought. Is there the scope to avoid issues going to court, for example, by having rules and guidelines clarified and set down so that both lenders and borrowers have a clearer understanding of what is permissible under the legislation? If that is the case, that would be very welcome.
The fees for the ADR will make it work and will cover the costs of the scheme. It will be possible, I think, for the first two cases to be free for businesses, but the fees relate to the cost of the overall scheme.
The overlap with the courts can arise in two ways. First, the consumer might want to make a complaint to the FOS, but the firm might start court proceedings. Where the court considers it appropriate, it can stay those proceedings while the consumer makes the complaint to the FOS. Secondly, the complaint might be taken straight to the FOS, but the ombudsman might consider that the courts would be better suited to deal with it. However, the FOS can informally discuss things and try to reach an informal arrangement. It can also decline to deal with a case if it involves a third party over which it has no jurisdiction or if the complaint appears to be solely about the legitimate exercise of a firm's commercial judgment in setting an interest rate and it would be more appropriate for the court to consider the rate-setting on the basis of expert evidence.
In general, there is no prescribed mechanism for how the FOS and the courts will work together in practice, but we anticipate that they will co-operate and complement each other. The idea is to have an informal set of circumstances before the case proceeds to the formal FOS decision. If the FOS cannot deal with the case, it can go to the court. Equally, the court can refer an issue to the FOS.
That is a good way of dealing with these difficult situations. The process will not be off-putting for consumers, because most things will be in writing, and their representatives can be involved. That is a good way of trying to resolve difficulties within the context of the Bill's overall aim of achieving greater transparency, with pressure on lenders to lend responsibly and on people fully to understand their rights.
I am genuinely grateful to the Minister for that clarification. To use his own words, it was good, but not excellent. I would be grateful, however, if he could go into a bit more detail about the fees. Is he saying that people might be charged for using the financial ombudsman service? When we refer constituents to the local government ombudsman or the parliamentary ombudsman, there is no charge for using them. I am not clear whether the fees that we are talking about are for people who make an application to the ombudsman to have their case reviewed or whether they are for something entirely different. Are other ombudsmen able to charge fees in the same way?
Again, I am grateful to the hon. Gentleman, and I apologise to the Committee for not explaining the point clearly. The fees are a levy on business. The business world will have to pay a levy towards the cost of the ADR scheme, but there will be no cost to the individual who makes a complaint to the FOS. As I said, the levy will sometimes mean that the first two cases are free for business and will not attract a charge, although subsequent cases will. I make it clear, however, that the service is free to consumers. I hope that that clarifies the point.
Question put and agreed to.
Schedule 2, as amended, agreed to.