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If your firm is one of the 100,000-plus firms that holds a Consumer Credit Act Licence in the UK, and you have not already taken steps to prepare for the new rules you will be in danger of breaking the law after 6th April 2007, and could face costs of up to £100,000. According to Credit Complaints Limited, the vast majority of licensees are totally unaware of the new rules and the risks they will be facing after the deadline.

The Consumer Credit Act 2006 extends the jurisdiction of the Financial Services Ombudsman Service (“FOS”) to consumers who have an unsatisfied complaint against a company with a standard Consumer Credit Act Licence.

Licensees will have to comply with strict new regulations concerning the handling of complaints from 6th April 2007 and they need to have the appropriate procedures in place before then.

The new rules require licensees to:

- Display a notice in their premises saying they are subject to the FOS rules;

- Have detailed written procedures in place for complying with the rules, and in particular, for the handling of complaints;

- Give complainants a written summary of the firm’s complaints procedures;

- Deal fairly with all complaints and pay appropriate redress where the firm is at fault;

- Tell complainants they have the right to refer their complaint to the FOS and provide them with the appropriate FOS leaflet;

- Pay the fees for the FOS Service. These have been set at £400 for each complaint referred to the FOS (after two 'free' complaints each year), plus an annual fee of around £150, which will be collected by the Office of Fair Trading with the licence fee;

- Fully co-operate with the FOS in carrying out its investigation;

- Pay any awards of up to £100,000 per complaint made by the FOS, without the right of appeal;

- All complaints must be acknowledged in writing with five days (unless they have already been settled);

- The firm must endeavour to settle the complaint (or reject it) within four weeks;

- If the complaint is still not settled within four weeks the firm must write and explain when it expects to be able to resolve the matter, which must be within eight weeks,

-When the complaint is resolved the firm must issue a ‘final response letter’ which again informs the complainant of his right to refer the matter to the FOS if he is not satisfied.

Operating good written complaints procedures should reduce the risk of having to pay awards to complainants by reducing the number who refer the complaint on to the FOS, but business owners should be warned that the risk cannot be avoided completely without insurance.

Further information on the new rules is available here.

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