What is FOS?
The Financial Ombudsman Service (“FOS”) is a free financial dispute resolution service that Acts as a fair and impartial judge for eligible complainants. These eligible complainants must first have made a complaint to the alleged offending company, if no resolution can be reached then the complaint can be escalated to the FOS who will review all the information and come to an impartial decision.
What is the New Consultation About?
In May 2024, FOS launched a second Consultation to implement a new charge for complaints escalated by Complaint Management Companies (“CMCs”) and other professional representatives. Currently, the FOS is seeing a large number of ‘batch’ complaints being brought by CMCs and other professional representatives that have not been appropriately screened to ensure that the complaints warrant further escalation. The new charge is looking to dissuade CMCs from pushing through large amounts of complaints that have not been screened post outcome with the respondent firm.
Why is the Charge Necessary?
The FOS is currently receiving a large number of complaints, with nearly 20% of 400,000 screened complaints being brought by CMCs. The number is resulting in the FOS struggling to keep pace with the influx of cases and in providing good outcome for complainants.
Case fees are currently payable by the respondent firms (i.e. those that are the subject of the complaints) on a “polluter pays” principle, with each case subject to a £650 fee (subject to each firm having three free cases per year). The current system therefore favours CMCs and other professional representatives as there is little to no liability to pay for failed claims. This has resulted in the trend of ‘batch’ submissions by CMCs and other professional representatives, thus stretching the resources of the FOS to provide good outcomes.
There is therefore minimal risk in submitting cases to the FOS even if it is not believed that they will be successful. This, coupled with the fact that, typically, the firms are paid a percentage of any complaint reward, is leading to some firms gaming the system.
What are the Proposed Charge Changes?
To try and reduce the submission of ‘batch’ complaints and re-enforce the need to review complaints post outcome of the respondent firm, the FOS is proposing the introduction of a fee of £250 per case for CMC and other professional representatives to submit complaints, reducing to £75 if the outcome of the review finds in favour of the complainant.
Once implemented, it is hoped that cases submitted to the FOS will be more focused and allow the FOS to provide a more efficient and ultimately more cost-effective service.
Are there any Exemptions?
The charges will apply only where a commercial entity is operating at scale. There will be no fee where complaints are escalated to the FOS by individuals. Charities, family members and advisory organisations will all be exempt from the new charges. Alongside this and similar to respondent firms, CMCs and other professional representatives will be allowed three free case submissions per financial year which will allow them to test the thresholds of the FOS on new/novel cases and to use the outcomes to advise similar clients accordingly.
Next Steps
The Consultation will remain open until 4th July 2024 with the FOS taking the opinions of the industry into account when developing the next steps and implementation. An implementation date for 1st October 2024 is being targeted to allow CMCs and other professional representatives time to review their processes and ensure focused entries are made moving forward.
How can Complyport Help?
At Complyport we have extensive experience with the reviewing and development of Complaints policies and procedures. We offer the following:
- Review and screen complaints for firms based on FCA and FOS expectations;
- Review Complaints Management systems and procedures;
- Perform a historic complaints review and provide feedback; and
- Assist in developing and/or strengthening complaints procedures.
If we may assist you with any of these or other regulatory issues, please get in contact by completing the form below to book a free consultation.
