Financial Ombudsman Service
People with complaints against financial services firms such as banks, IFAs and life insurance companies often have the option of putting their complaint to the Financial Ombudsman Service (known universally as FOS). In many ways this is a first class organisation offering pain free redress to the consumer. Its services are free, its process does not involve courtroom confrontation (as it operates on paper) and it has a reputation for being independent and tough on recalcitrant banks, IFAs etc.
Because compliance requirements make financial services firms inform consumers about the FOS, it is often thought that this is the only, or at least the first, place to go for redress. Some IFAs wronly tell clients they have to use FOS.
When consumers consult me, I always consider the FOS as an avenue for redress. There are many reasons to use it, but it has limitations. There is a real choice between FOS and the courts.
In advising clients I usually use a table of comparisons to set out the pros and cons of each, I reproduce this below:
|Operates in an investigative way||You have to gather all the evidence yourself|
|No trial (but few settlements)||A trial if not settled (but usually are)|
|You do not see the opponent’s papers||Papers are disclosed (including yours)|
|Limited to awarding £150,000 (for complaints received after 1st January 2012).||No limit on jurisdiction|
|Can award other than money (eg top up of fund)||Can only award money (in this sort of case)|
|Does not award costs (usually)||Loser pays winners costs (usually)|
|No appeal||Appeal to higher courts|
|You need not accept award (but opponent is bound)||Both parties bound|
|Sometimes indifferent quality||Judges usually high quality|
|Not bound by strict precedent||Bound strictly by law|
|Understands industry||May not have special knowledge|
|Truth can be concealed as no cross examination or disclosure of papers||Truth will usually come out|
|Low cost||Can be very costly|
The points to remember are:
1. It is best to decide whether you are going to use the courts or the FOS at the outset. If you choose to use FOS, and you do not get a satisfactory result, you may find that the limitation period for using the courts has expired whilst you have been waiting for the FOS. You also have the psychological hill to climb of having already lost in one forum.
2. FOS does not tell you how much your claim is worth. I have had several clients who have gone to FOS and have won their case only to find that the award that they get is insufficient to cover their losses. So they have to reject the award and start all over again.
3. FOS often does not award any definite sum. It makes an order that the recalcitrant firm calculate the losses on a particular basis. The complainant then has to decide whether to accept the award or not, not knowing what money he is accepting. That can lead to unfairness if the firm carries out the calculation of redress in an unfair way.
4. FOS can only award up to £150,000 (for complaints received after 1st January 2012). Many people do not realise the size of their claims, particularly in pension matters, and this is often not nearly enough.
5. FOS claims handlers (called adjudicators) are of very mixed quality. Some are good, but some are really poor.
6. FOS does not always show itself to be independent and can be a little political. This can assist the consumer, of course, if he has what may be described as a “fashionable” complaint such as endowment insurance mis-selling.
As a broad rule of thumb I tend to advise a client that if the claim is worth £50,000 or less FOS is often likely to provide a more satisfactory result. However the courts are on the whole quicker than FOS and, because costs follow the event, if you use professional help, you can usually get a more cost effective result from the courts.
One option which some clients like in small cases is to use FOS but to get me to help them with key parts of the process. The most important part in a FOS matter is the letter of complaint to the firm complained about. This should be detailed and written with an understanding of the FSA’s rules for the conduct of business and FOS’s known policy on a particular issue, if there is one.
Such an approach is often cost effective and does not commit the client legal fees as large as would be incurred if a solicitor had the running of the whole matter from beginning to end.