Financial fair play

Adam Bernstein suggests that, while fighting a large institution can be a David and Goliath situation, the Financial Ombudsman Service can level the playing field.

Hacked off with the bank over new charges? Angered by an insurer’s refusal to pay an insurance claim? What about a merchant acquirer levying new charges that seem unfair? These are all matters for a well- established, but not necessarily well-known, government body, the Financial Ombudsman Service (FOS). With new powers granted from 1 April 2019, it can help a business fighting big financial institutions.

The FOS is a free service set up by Parliament to deal with complaints against any financial organisation. 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 because, depending on the claim, an institution may settle a case that it might not win rather than dig its heels in. This is because, as it presently stands, each institution is permitted 25 investigations a year without charge. Beyond that, they pay £550 per case, added to which will be its own internal costs and time in dealing with the case; a fee per case is chargeable by the FOS whether the institution wins or loses. There are consequences for any firm that threatens to penalise a complainant for exercising their legal right to take a case to the FOS.

Wider protection

Primarily aimed at helping the individual, the FOS has been able to help certain businesses and charities. However, from 1 April, more firms came under its protection. Assistance can now be given to companies with less than £6.5m turnover that have less than 50 staff and a balance sheet of under £5m. As the FOS points out, it can resolve complaints about most financial products and services including debt collection and repayment, mortgages, pensions and investments, PPI insurance, bank accounts, payments, cards, loans and credit.

Before the FOS can step in, a complainant has to give the institution an opportunity to investigate and, where appropriate, fix the problem. The institution then has eight weeks to respond with an offer to fix, or alternatively, a ‘deadlock’ letter where it denies the claim. After that the FOS can intervene.


However, there are strict time limits. In essence, it cannot investigate matters that happened more than six years prior to the claim, or which happened more than three years from when the matter first arose (or should have been noticed). Further, the FOS cannot examine matters where the complaint is made more than six months after the deadlock letter has been issued.

The FOS can deal with matters relating to a deceased person, but it will need to see proof of authority to act – a copy of a Will or a grant of probate, for example. It can also investigate any firm in the UK (but not in the Isle of Man or Channel Islands), even if the complainant lives overseas.

Established by Parliament, the FSO can help with complaints about most financial services.

Where the decision goes against the complainant, it’s possible to appeal to the Ombudsman itself. Beyond that, if the decision is held in favour of the institution, it is still possible to move the

matter to the courts. However, 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, with no need to have representation. That said, if the matter is complex or large sums are involved, it may be worthwhile seeking legal advice to see if a court is a better option. Further, the FOS cannot take on the case if the matter has already been through the courts. If the decision goes in the complainant’s favour, the Ombudsman can require the institution to either apologise, pay an award to cover loss, refund fees and charges, or pay compensation.

However, just as from 1 April new powers helped more businesses, so the limits on compensation rose. Complaints made before 1 April were limited to £150,000; now those relating to periods before that date but referred to the FOS after 1 April are limited to £160,000, and complaints relating to periods after 1 April have an upper limit of £350,000. Beyond those limits the FOS can only recommend that the institutions pay more. On top of those limits, which only relate to compensation, are costs and interest.

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