Wealth management trade body PIMFA has urged the FCA to reconsider the role of the Financial Ombudsman Service (FOS) and to explore consolidating the regulatory regime for claims management companies (CMCs).

The association was responding to FCA proposals to modernise the redress system.

Last month in a letter to CEOs FCA chief executive Nikhil Rathi revealed that he is considering reforms to the redress framework which may need legislation.

PIMFA said the regulator should “look beyond the iterative proposals they have put forward in their recent discussion paper.”

The trade body said that while the headline proposal of “defining a mass redress event” would be a welcome intervention, many of the concrete proposals set out within the paper would have mixed results and would prove minor in their nature.

PIMFA said where the mass redress events occur, it believes that there is scope in resetting the boundaries around how the FOS operates and, crucially, about what it does not do, which would likely significantly reduce the operational pressure on the FOS.

The organisation said it believes that in the case of mass redress events, and where firm-led solutions have been agreed in dialogue with the FCA and/or a skilled person, the FOS should only follow on from the agreed redress programme outcome - acting as a final backstop to consider if the programme parameters have not been fulfilled where the customer remains unhappy with the outcome.

The trade body also outlined how it thought the FCA and government should consider consolidating the disparate regulatory regimes governing CMCs to overcome that the current regulatory arbitrage with the two primary regulatory regimes.

That would result in more consistent experiences for consumers and better regulation of the CMC sector more generally, PIMFA said.

It said it would favour the FCA having powers over all financial services-focused CMCs rather than the current regime which provides for some Solicitors Regulation Authority (SRA) regulated professional representatives to bring forward financial services claims.

Simon Harrington, head of public affairs at PIMFA, said: “Ensuring that we have a fit for purpose redress system when things go wrong on a major scale is an important step in ensuring that consumers who have been let down receive a fair outcome.

“While we think that it is right that the FCA have identified some areas for reform – specifically the need to identify when a mass redress event has occurred, we also believe there is scope for them to be more ambitious and assertive in their proposals.”