The Financial Ombudsman Service has launched a consultation into extending its remit to cover a wider range of financial transactions.

The move would bring thousands more credit firms and other lenders under the watchdog's scrutiny.

Millions of consumers currently have no access to an independent ombudsman service to settle possible disputes with lenders.

The Ombudsman is also proposing to deal with complaints about mortgage and insurance brokers until 2004, when the Financial Services Authority (FSA) is due to take on responsibility for regulating these firms.

It also proposes to hear complaints about some firms before they were regulated by the FSA.

The measures are part of the Financial Ombudsman Service's plan to become a "one-stop" service for financial complaints.

Credit firms

Under current rules, "lending" is not regulated by the FSA, although consumers who borrow through authorised firms, such as banks and building societies, are automatically covered by the Financial Ombudsman Service.

Those who borrow from a non-authorised firm must go to an arbitration service run by the Finance & Leasing Association, a trade body.

There are more than 150,000 consumer credit licences, with thousands of lenders not covered by the ombudsman.

The ombudsman is proposing to widen its jurisdiction to include companies involved in the supply of personal loans, debt management consolidation services, and non-authorised credit card companies.

Store cards could also be covered.

The scheme would be voluntary.

Mortgage broking

At present, 13,000 mortgage brokers subscribe to a mortgage code run by the Mortgage Code Compliance Board, while the General Insurance Standards Council (GISC) deals with complaints against general insurance brokers.

Critics say that the system needs tightening, pointing out that only one-third of general insurance brokers currently belong to the GISC scheme.

The current system for complaints against mortgage brokers and insurance intermediaries is due to undergo major change in 2004.

From 2004, they will be regulated by the FSA and therefore come under the compulsory jurisdiction of the ombudsman.

The ombudsman is now proposing to encourage voluntary jurisdiction for mortgage brokers and general insurance intermediaries in the run-up to 2004.

Responses must reach the ombudsman by 12 August 2002.