An intra-organisational perspective on the role of consumer complaint handling in the UK retail investment regulatory regime (1981-2004)

The thesis examines the determinants of regulatory responsiveness to consumer complaints in the context of third-party complaint handling. In contrast to a rational choice hypothesis, according to which regulatory responsiveness is shaped by external pressures, the thesis hypothesises that the latter are mediated by intra-organisational institutions (ethos and control structures). It further challenges the expectation that regulatory complaint handling functions as an accountability mechanism. The case of the UK Financial Ombudsman Service (FOS), which handled consumer complaints regarding the retail selling of financial products, and its relationship with the Financial Services Authority (FSA), is employed to assess the above hypotheses. Data collection combined non-participant observation, sampling of complaint files, interviews and archival research. Data analysis combined quantitative and qualitative methods. The findings reveal the hypotheses’ strengths and limitations. The FOS’s ethos stressed the individual nature of complaint handling. It embodied a strategic exchange between the Ombudsman and the financial industry, allowing the former broad discretion to respond to consumer grievances but restricted legal scope for its decisions. In contrast to the hypothesis that ethos shapes responsiveness, the FOS’s emphasis upon the individuality of its decisions had limited impact upon complaint handlers’ decision making. Yet, the research findings further refute the expectation of ‘rational’ responsiveness to resistant firms and persistent complainants. Rather, complaint handlers’ decisions were shaped by their adherence to internal guidance and, in its absence, by their reliance upon heuristics for firms’ and complainants’ credibility. The thesis highlights the FOS’s latent function as a pressure-releasing mechanism for some consumers’ high expectations for risk mitigation. It depicts the therapeutic nature of complaint handlers’ interpersonal communication with complainants, and the FSA’s disinclination to perceive FOS decisions as indicative of systemic failures. However, it also demonstrates how this function was undermined by media coverage of FOS decisions and by firms’ reputation sensitivity.