The Financial Ombudsman Service was set up by parliament to deal with complaints against any financial organisation
Bank charges, insurers refusing to pay a claim and terms changing on a business credit card are all matters for a well-established, but not necessarily that well-known, official body, the Financial Ombudsman Service (FOS). With new powers granted from 1 April 2019, the FOS could well be a firm's route to fighting big financial institutions—at no cost.
The Financial Ombudsman Service
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 is 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 digging in its heels unnecessarily. This is because, as it presently stands, each institution is permitted 25 investigations a year without charge. Beyond that, they pay £650 per case, added to which will be its own internal costs and time; the fee is chargeable whether the institution wins or loses.
Primarily aimed at helping the individual, the FOS has, for some time, been able to help certain businesses and charities. However, from 1 April 2019, more organisations came under its protection. Now, assistance can be given to firms with a £6.5 million turnover (previously £1 million), have less than 50 staff (previously was less than 10) and have a balance sheet of less than £5 million (previously was less than €2 million—yes, euros).
As the FOS points out on its website, it can resolve complaints about most financial products and services, including debt collection and repayment, mortgages, pensions and investments, bank accounts, payments, cards, loans and credit. 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.
The process
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 8 weeks to respond with an offer to fix or, alternatively, a ‘deadlock’ letter where it denies the claim. From that point on, the FOS can intervene.
However, and this is important, there are strict time limits placed on the FOS's investigations. It cannot examine matters that happened more than 6 years prior to the claim or more than 3 years from when the matter first arose (or the matter should have been noticed). Furthermore, the FOS cannot investigate matters where the complaint is made more than 6 months after the deadlock letter has been issued.
It is worth pointing out that the FOS can investigate matters relating to someone that has died, but it will need to see proof of authority to act, for example, a copy of a will or a grant of probate. It can also investigate any firm in the UK (but not one based in the Isle of Man or Channel Islands), even if the complainant lives overseas. It is just as noteworthy that some overseas firms—PayPal is an example—have asked to be covered by the FOS.
The online process guides a complainant when making contact, but it is expected that information supplied includes an overview of the problem, details of the institution at fault, supporting evidence and what is needed to deal with the matter.
The FOS approximates that 90% of complaints are dealt with by its first level investigators. However, hearings can be held if the investigator cannot decide the case and more information is needed. Alternatively, either side can request a hearing, explaining the points that they would like to make when making the request. 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 the decision goes against the complainant, it is possible to appeal further within the FOS. Beyond that, if the decision is held in favour of the institution, it is still possible 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.
One thing to note is that the FOS is designed to be simple to use and informal. There is no need for a complainant to hire representation. That said, if the matter is complex or large sums are involved, it may be worthwhile their seeking legal advice to see if a court, rather than the FOS, would be better. However, the FOS cannot take on the case if the matter has already been through the courts.
Panel: complaints against clinics
A look at the Financial Ombudsman Service's website shows that cosmetic clinics have been involved in a number of complaints, not all of them successful.
Back in February and March 2016, two separate complaints were made about SCOR UK Company Limited, which denied two professional indemnity claims made by surgeons, Mr H and Mr K, following complaints by patients that they had allegedly used defective implants (Financial Ombudsman Service, 2016a; 2016b). In both cases, the insurer refused the claim on the basis that that the claims concerned product liability, not professional indemnity. In both cases, the ombudsman used the natural meaning of the language used in the policy to note that the consultants were not the suppliers of the implants, and so could not be held in breach of any implied term or condition as to the quality of the implants.
In both cases, the ombudsman upheld the complaints made by the consultants and that the insurer should deal with the claims appropriately under the agreed terms of the policy (Financial Ombudsman Service, 2016a; 2016b).
Some of the other cases have revolved around patients making claims against their credit card provider, as they seek refunds for treatments such as liposuction that were claimed to be of a poor standard. In one, ruled on in April 2017, the patient alleged that the effectiveness of the treatment fell below an acceptable standard, which was compounded by the wrong garment being issued post-treatment (Financial Ombudsman Service, 2017). In its ruling, the ombudsman felt that there was not any independent evidence about the garment causing complications, and a corrective surgery clause was not triggered because the criteria had not been met. The complaint was rejected.
Panel: complaints data
According to the Financial Ombudsman Service's 2019/20 annual review, it received 1000 new contacts and 215 complaints from businesses, with the most frequently complained about product being banking (78%).
While some of the complaints that the Financial Ombudsman Service has seen from small and medium-sized enterprises (SMEs) have been more complex in their nature, it has also seen that many business customers have similar problems to individual consumers. However, the impact of such issues is often more severe, which costs businesses valuable time and resources to put right.
Results
If the decision goes in the complainant's favour, the FOS can require the institution to either apologise, pay an award to cover loss, refund fees and charges or pay compensation.
However, just as the FOS gained new powers to help more businesses from 1 April 2019, so the limits on compensation rose. Complaints relating to issues before 1 April 2019 were limited to £160 000. 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 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.
Enforcing a ruling
Where the FOS has made a costs or compensation award, the institution will be told what and who to pay. The decision is legally enforceable by the courts.
However, what if the institution refuses to comply? In this instance, it will be necessary to begin enforcement proceedings. Location of courts and enforcement offices can be found online in England and Wales at gov.uk/government/organisations/hm-courts-and-tribunals-service, in Scotland at scotcourts.gov.uk and in Northern Ireland at justice-ni.gov.uk/topics/courts-and-tribunals.
The case must be brought in the name of the person or business on the final decision document from the FOS—exactly as it written. Where the institution cannot pay (for example, it has gone out of business or is about to), the claim can be sent to the Financial Services Compensation Scheme (FSCS) as a last option. The FSCS takes information from the FOS and progresses the claim under its separate rules.
Summary
While fighting a large financial institution puts a complainant in a David and Goliath situation, the FOS can level the playing field. There are time limits and a process to follow. However, anyone or any business with a decent case should actively pursue their rights.
Make contact
Email: complaint.info@financial-ombudsman.org.uk
Phone: 0800 023 4567 (open 8am–8pm Monday to Friday, 9am–1pm on Saturdays)