Blog 27th Jan 2014

The financial ombudsman service: Growing in presence and not to be overlooked

In recent years the Financial Ombudsman Service has seen its powers and market visibility grow markedly. So much so that the Personal Finance Society president David Ingram has told Money Marketing: “The industry is more scared of FOS than the FCA.” The latest FOS Plan and Budget for 2014/2015 was published in January 2014. This identifies the growth from just 25,000 cases in its first year of 2000/2001 to more than half a million cases in 2012/2013.

Businesses should not overlook the presence of FOS as unhappy consumers have free and direct access to the it. Since January 2012 the FOS has been making awards of up to £150,000. Of course, win or lose, the business will always still pay; the business will pay a non-refundable case fee of £500 no matter what the outcome of the Ombudsman’s findings.

Businesses ought to be concerned not just about the financial implications of a complaint to the FOS but also the allied reputational risk. As a result of the Financial Services Act 2012 (which came into force in April 2013) the FOS must now publish all binding final decisions which it issues. In a time of intense distrust and scrutiny directed towards the financial sector, all businesses are trying to regain the trust of consumers; in doing so they have recognised that following good industry practice is essential to avoid falling foul of the FOS. Executive director of Which?, Richard Lloyd, commented on the number of complaints shown in the FOS Plan and Budget: “[They] show that the banks still have a long way to go to transform their culture.”

It is noteworthy that in 2013 it was reported that First Direct, of the HSBC Group, received more complaints per consumer than any other brand. Starting today, 3 February 2014, Natalie Ceeney, former Chief Executive and Chief Ombudsman of the FOS, is the new Head of Customer Services at HSBC; just 3 months after her resignation from the FOS.

In addition, we await the Court of Appeal’s decision in Clark v In FocusAsset Management and Tax Solutions Ltd. Heard last October (2013), Mr and Mrs Clark are seeking the right for consumers to take their complaint to the FOS and, after accepting the decision (up to £150,000), sue the business for the outstanding sum; in that case up to £400,000. The repercussions for businesses and consumers are far reaching, potentially giving consumers two bites of the cherry and £150,000 in the bank to sue the business for the outstanding sum.

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