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Financial Ombudsman Service: The Facts and The Figures

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Everything you need to know about the Financial Ombudsman Service (FOS) and their role in resolving complaints within the financial services sector.

 

Who are the FOS?

The Financial Ombudsman Service was established in 2000 and given statutory powers in 2001 by the Financial Services and Markets Act 2000, to help resolve complaints between customers and UK-based businesses providing financial services, such as banks, building societies, insurance companies, investment firms, financial advisers and finance companies. The FOS case handlers and ombudsmen have a range of technical, academic, and professional qualifications and experience to enable them to undertake their duties.   

Eligible Complainants

An eligible complainant to FOS must be a person that is:

  1. a consumer; or
  2. a micro-enterprise
    1. in relation to a complaint relating wholly or partly to payment services, either at the time of the conclusion of the payment service contract or at the time the complainant refers the complaint to the respondent; or
    2. otherwise, at the time the complainant refers the complaint to the respondent; or
  3. a charity which has an annual income of less than £6.5 million at the time the complainant refers the complaint to the respondent; or
  4. a trustee of a trust which has a net asset value of less than £5 million at the time the complainant refers the complaint to the respondent; or
  5. (in relation to CBTL business) a CBTL consumer; or
  6. a small business at the time the complainant refers the complaint to the respondent; or
  7. a guarantor.

The Time Limits

Complaints should be responded to by the business in line with the timeframes set out by the Financial Conduct Authority 'DISP' rules ordinarily, this would mean issuing a Final Response Letter by the end of 8 weeks after receipt of the complaint. The Final Response Letter should set out if the complainant is eligible to refer their complaint to FOS.

The customer client has 6 months from receiving the Final Response Letter to refer their complaint to FOS.  In exceptional circumstances, for example, the customer’s extremely ill health, FOS may accept a referral after 6 months have passed.

The customer also needs to complain to the business or FOS within 6 years of the event complained about or within 3 years of becoming aware (or when they ought reasonably to have become aware) that they had cause to complain.  Outside of this timeframe, FOS may not be able to consider a complaint.

FOS does not recognise the 15-year "long stop" imposed by the courts whereby the event complained about must have happened within the last 15 years.

The Process

Once FOS has established that the complaint is one they can consider, they will obtain information from both the customer and the business. The case handler will consider the facts and evidence available and make a decision based on what they believe to be fair and reasonable. The customer and the business will then be given time to consider whether they agree with this initial assessment and the recommendations made by the case handler.  If both parties agree the complaint can be resolved at this stage.

If either party does not agree with FOS' initial assessment of a complaint, they can request that the case be referred to an ombudsman.  The ombudsman will consider the case afresh, together with any further submissions received, and make a final decision based on the circumstances of the complaint, taking into account any relevant laws, regulations, and good practice.  The final decision may be preceded by a provisional decision that sets out the conclusion the ombudsman intends to make, at which stage this can be challenged by the consumer or the business.

If the customer accepts the final decision it becomes legally binding for both parties and the business must carry out the ombudsman’s recommendation to put things right.

If the customer does not accept the final decision it is not then binding and the business is under no obligation to follow the ombudsman’s recommendation.  The customer may, of course, then choose to pursue their complaint through the court.

What next?

You cannot go to court to appeal an ombudsman's decision just because you disagree with it but FOS is a public body and can be subject to a judicial review.  A judicial review ordinarily focuses on the process used by an ombudsman to reach their decision rather than on the facts of the dispute itself.  The courts will not tell the ombudsman that they reached the wrong conclusion, only that they need to follow the correct process and therefore a judicial review might result in the ombudsman reaching the same conclusion but by different means.

In our experience, a judicial review can be an expensive process for a firm to pursue, legal assistance would be required and professional indemnity insurers may not be in support of this route of challenge.  However, businesses and insurers may change their stance on this issue as complaints begin to fall to the higher limit (see below).

Award Limits

For upheld complaints, FOS seek to put the customer back in the position they would have been in, had it not been for the business’ error or omission.  FOS can impose money awards, awards for distress and inconvenience, interest awards, costs awards and non-monetary directions.

Different award limits apply depending on when the case was brought to FOS:

£375,000 for complaints referred to FOS on or after 1st April 2022 regarding acts or omissions by firms on or after 1st April 2019

£355,000 for complaints referred to FOS between 1st April 2020 and 31st March 2022 regarding acts or omissions by firms on or after 1st April 2019

£350,000 for complaints referred to FOS between 1st April 2019 and 31st March 2020 regarding acts or omissions by firms on or after 1st April 2019

£170,000 for complaints referred to FOS on or after 1st April 2022 regarding acts or omissions by firms before 1st April 2019

£160,000 for complaints regarding acts or omissions by firms before 1st April 2019 referred to FOS after that date

£150,000 for complaints referred to FOS before 1st April 2019

How Much?

The service is free to the customer.

The business pays a case fee of £750 from the 4th complaint onwards i.e. the first 3 complaints are not chargeable.

The Figures

From 1 April 2021 to 31 March 2022 FOS received over a quarter of a million enquiries from customers with issues regarding financial services received, resulting in

165,263 new complaints in 2021/22

218,740 resolved complaints in 2021/22

38% overall uphold rate in 2021/22

Note

The business must inform their broker/insurer upon receipt of a complaint or FOS referral to obtain guidance before taking action and throughout the process.

Our clients are welcome to reach out to their usual Howden contact for any assistance they may require.

References:


 

This article was authored by members of the Howden Financial Lines Claims team. If you have any questions on any of the above, please contact your usual Howden representative in the first instance. 

Tracy Simpson, Senior Claims Executive
E: [email protected]