The firm is a retail intermediary partnership. The two partners are the only advisers. The firm provides advice on investments, mortgages and general insurance. It has been in business for eight years and has received one complaint. The complaint was rejected by the firm and subsequently referred to the Financial Ombudsman Service (FOS).

Summary of issue

FOS upheld the complaint. FOS subsequently referred the matter to the FSA as the customer had informed the FOS he was unhappy with the terms of redress offered.

What had happened?

The firm offered to pay redress due to the customer over a period of nine months. The firm did not give the customer the option of receiving the redress as a lump sum payment although the firm had the financial resources to do so.

FSA's DISP rules require a firm to pay a FOS award 'promptly' but do not specifically state that the payment of redress by an instalment method is not allowed. The firm decided that as the customer had been 'difficult' the offer to pay redress over a nine month period was a reasonable interpretation of the DISP rule.

Subsequently, the firm proactively reviewed the complaint to investigate why the customer was not satisfied with the original outcome and what could have led the customer to refer his complaint to FOS. The firm concluded that its investigation and subsequent communication to the customer did not adequately address the customer's complaint and as a direct result the firm changed its complaint procedures and communications.

What behaviour does FSA expect?

Principle 6 requires a firm to treat its customers fairly.

The DISP rules supplement the Principle and sets out how firms should handle complaints. However, there is still some element of decision making on behalf of the firm.

In looking at DISP and deciding what 'promptly' meant in terms of payment, the firm failed to consider its wider responsibilities under Principle 6. However, the firm had shown good practice in considering and acting on lessons learned from the complaint.

Outcome

After discussing with the FSA, the firm agreed that by offering payment over a nine month period, it was not treating its customer fairly.