Advertisement
UK markets closed

  • FTSE 100

    7,895.85
    +18.80 (+0.24%)
     

  • FTSE 250

    19,391.30
    -59.37 (-0.31%)
     

  • AIM

    745.67
    +0.38 (+0.05%)
     

  • GBP/EUR

    1.1607
    -0.0076 (-0.65%)
     

  • GBP/USD

    1.2370
    -0.0068 (-0.55%)
     

  • Bitcoin GBP

    51,685.48
    +1,933.47 (+3.89%)
     

  • CMC Crypto 200

    1,371.97
    +59.34 (+4.52%)
     

  • S&P 500

    4,967.23
    -43.89 (-0.88%)
     

  • DOW

    37,986.40
    +211.02 (+0.56%)
     

  • CRUDE OIL

    83.24
    +0.51 (+0.62%)
     

  • GOLD FUTURES

    2,406.70
    +8.70 (+0.36%)
     

  • NIKKEI 225

    37,068.35
    -1,011.35 (-2.66%)
     

  • HANG SENG

    16,224.14
    -161.73 (-0.99%)
     

  • DAX

    17,737.36
    -100.04 (-0.56%)
     

  • CAC 40

    8,022.41
    -0.85 (-0.01%)
     
Property:

11 beautiful homes with glorious garden rooms

Investing in a home with a garden room will enable you to enjoy your outside space whatever the weather

Financial Ombudsman Service needs major reform, says think tank

Vicky Shaw, PA Personal Finance Correspondent
·4-min read

A body that aims to resolve disputes between financial firms and their customers is not fit for purpose, according to a think tank.

The Financial Ombudsman Service (FOS) is failing to deliver on its aim to provide fair and reasonable resolution of disputes at speed, and major reform is required, the Institute of Economic Affairs (IEA) claimed.

It said a reliance by the service on standard forms and case management systems may indicate that speed and an absence of formalities have been prioritised over fairness.

The fairness of the service’s decisions has been called into question on many occasions, it added.

ADVERTISEMENT

Concerns have also recently been raised about backlogs of complaints piling up during the coronavirus crisis.

Treasury Committee chair Mel Stride previously told BBC Radio 4’s Today programme: “This is an organisation that needs to sharpen up.”

The service has had huge numbers of PPI (payment protection insurance) complaints to deal with in recent years, although the scandal is now showing signs of tailing off.

The IEA said PPI cases had strained the ombudsman’s duty to provide fair resolutions at speed, with concerns that the FOS had prioritised turnover of cases over quality.

In early March, it was announced that ombudsman chief executive Caroline Wayman was stepping down.

The IEA said in 2019/2020 the cost per case was £920 – significantly higher than the budgeted cost of £650.

Although the increase had been attributed to the growing complexity of cases, this raised the question of whether such complex cases would be better dealt with in another forum, the IEA, which describes itself as a free-market think tank, said.

It argued that the FOS has expanded its role from resolving complaints to preventing detriment, which seems to overstep its statutory function.

It also said there are signs that the way the FOS operates has introduced unfairness and uncertainty for firms, particularly small and mid-market providers.

It claimed there is an imbalance in the standard of evidence that the FOS takes into account. For example, on investment advice complaints, it may take customer recollections into account, but for firms, its expectations are stricter, it said.

Because the service is funded based on the number of complaints received, the FOS receives significant income as a result of complaints pursued through claims management companies, which could create a potential conflict of interest, the IEA argued.

Victoria Hewson, head of regulatory affairs at the IEA and author of the report, said: “It is important that there is a forum for consumers to resolve disputes with financial services providers, because there is such an imbalance of power and asymmetry of information.

“But the FOS does not seem to be getting the balance right. It is in danger of infantilising consumers, who are not expected to take responsibility for their decisions, and playing into the hands of claims management companies.

“This acts against the interests of consumers as a whole, and favours larger firms, who can afford to provide for unpredictable awards, at the expense of smaller and more innovative providers.”

A spokeswoman for the FOS said: “Since the Financial Ombudsman Service was set up, we have helped millions of consumers resolve their problems with financial businesses.

“In 2020/21, excluding PPI, we received around 50% more cases than we expected to and are currently helping thousands of people with complaints, including many who have seen their lives or businesses impacted by Covid-19.

“We have recruited new staff to help us significantly reduce waiting times for customers and ensure we continue to provide an effective service.

“If anyone isn’t happy with how their complaint to a financial provider has been dealt with, they can come to our service with confidence that we will help put things right.”

Gareth Shaw, Which? head of money said: “It is important that consumers can take a complaint that can’t be resolved with a business to an ombudsman so it can be resolved fairly, particularly in financial services where cases can involve significant sums of money.

“However, people are currently facing huge delays before finding out whether they will get their money back and addressing this backlog of cases should be the Financial Ombudsman Service’s top priority.

“In order to achieve this, it needs to be adequately resourced to deal with the number of cases on its books, and in the meantime, it should do more to keep people informed about the progress of their case.”