Hacked off with bank charges? Angered by an insurer’s refusal to pay a claim? What about a failed payment? These are all matters for the Financial Ombudsman Service (FOS). With a number of powers, the FOS could well be your route to fighting big financial institutions – at no cost to your business.
The FOS is a free service, set up by Parliament to deal with complaints against financial organisations. Costs are borne by the financial services sector out of levies collected by the Financial Conduct Authority and case fees.
It’s these case fees that make the FOS interesting: depending on the claim, an institution may settle a case it might not win because as it presently stands, each institution is permitted 25 investigations a year without charge. Beyond that, they pay £650 per case – whether they win or lose, plus their own internal costs and time.
Initially aimed at helping individuals, since 1 April 2019, the FOS has been able to assist firms with up to £6.5 million in turnover, less than 50 staff, and a balance sheet of less than £5m. It can resolve complaints about most financial products and services, including pensions and investments, bank accounts, payments, cards, loans, credit, debt collection and mortgages. There are severe regulatory consequences for any firm that threatens to penalise a complainant for exercising their legal right to take a case to the FOS.
Before the FOS can step in, a complainant has to give the offending institution an opportunity to investigate and, where appropriate, fix the problem. This means making contact, outlining in simple terms what the issue is and what is required to make amends. The institution then has eight weeks to respond with an offer to fix, or a ‘deadlock’ letter, in which it denies the claim. From that point on, the FOS can intervene.
However – and this is important – there are strict time limits placed on FOS investigations. It cannot examine matters that happened more than six years prior to the claim or more than three years from when the matter first arose (or should have been noticed). Further, the FOS cannot investigate matters where the complaint is made more than six months after a deadlock letter has been issued.
It’s worth pointing out that the FOS can investigate matters relating to someone who has died, but it will need to see proof of authority to act – a copy of a will or a grant of probate, for example.
The FOS reckons that 90 per cent of complaints are dealt with by its first level investigators. However, hearings can be held if an investigator cannot decide and more information is needed. Alternatively, either side can request a hearing. During the hearing, the ombudsman summarises the case, lets each side make its case, asks questions and allows each side to ask questions of the other. Legal representation is not encouraged.
Where a decision goes against a complainant, they can appeal further within the FOS. Beyond that, if the decision is held in favour of the institution, it is still possible to move the matter to the courts. But if the decision is accepted, there is no further recourse. Either way, the decision is binding on the institution.
The FOS is designed to be simple to use and informal. That said, if the matter is complex or large sums are involved, it may be worthwhile seeking legal advice to see if a court, rather than the FOS, would be better. Further, the FOS cannot take on a case if the matter has already been through the courts.
If the decision goes in a complainant’s favour, the FOS can require an institution to apologise, pay an award to cover loss, refund fees and charges, or pay compensation.
Complaints relating to periods before 1 April 2019, but referred to the FOS after 1 April 2019 and before 1 April 2020 are limited to £350,000. However, complaints relating to periods after 1 April 2019 and referred to the FOS after 1 April 2020 have an upper limit of £355,000. Beyond this, the FOS can only recommend that an institution pays more. Costs and interest come on top of this.
The decision is legally enforceable by the courts. And where the institution cannot pay, the claim can be sent to the Financial Services Compensation Scheme (FSCS) as a last option.
Tel: 0800 023 4567 (8am to 8pm Monday to Friday, 9am to 1pm Saturdays).