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The Financial Ombudsman Service (FOS)

Jun 03 2013

The Financial Ombudsman Service (FOS)

Reason for issue:         Update and reminder.

Action required:           Read and ensure your CPD record in your Training Log is updated.



The Financial Ombudsman Service (FOS) was set up by the UK’s Parliament in 2001 under the Financial Services and Markets Act 2000 (FSMA) and acts as the independent body for settling disputes between consumers and businesses providing financial advice.

FOS covers all retail financial firms regulated by the Financial Conduct Authority (FCA) as well as all businesses holding a standard consumer credit licence from the Office of Fair Trading (OFT).

How is the FOS funded?

FOS is paid for by levies and case fees charged to businesses covered by them; consumers are not charged for taking a complaint to FOS.

The amount of levy paid by FCA-regulated firms is related to the firm’s “Relevant Annual Income”, which is income derived from individuals or organisations classed as eligible complainants, i.e. those who can take their complaint to the FOS, (see below).

Each OFT-regulated business currently pays a levy of £140 for each five-year period.

Individual case fees (currently £550) are also required from businesses covered by FOS, including those that are no longer regulated, if FOS handles a complaint about them.

All businesses are entitled to a number of “free” cases.  FOS does not charge for the first 25 chargeable cases closed during the (financial) year; they charge only for the 26th (and any subsequent) case.

From April 2012, FOS also charges a supplementary case fee (currently £350) for each payment protection insurance (PPI) mis-selling case, again chargeable only on the 26th (and subsequent) case during the year.

From April 2013, FOS has introduced a group-account fee for the four largest banking groups.

Who is eligible to complain to the FOS about individual businesses?

Complaints can be made by, or on behalf of, customers (or potential customers) who are:

  • consumers; or
  • micro-enterprises (an EU term for firms with fewer than10 employees and turnover of less than €2m); or
  • charities with income of less than £1m; or
  • trusts with a net asset value less than £1m.

What does ‘covered by the ombudsman service’ mean?

In simple terms it means that firms must have in place and operate complaints-handling procedures that comply with the FCA’s complaints-handling rules.  Consumers who have a complaint about a firm will generally be able to refer it to the FOS.

However, the FOS will only get involved in looking at a consumer’s complaint against the firm if it has already had the opportunity to deal with it and the consumer remains unhappy with the final response.

Firms should take reasonable steps to ensure all relevant employees are aware of and follow the complaints-handling procedure.  It must also put appropriate management controls in place to ensure complaints are handled fairly, consistently and promptly and resolved at the earliest opportunity.

What are the relevant time limits before the FOS is involved?

Under the FCA rules, firms are required to try and resolve any complaints at the earliest opportunity and they have up to eight weeks in which to do this (this is sometimes referred to as the ‘eight-week rule’). The eight weeks start from the date a complaint is received. 

(Some firms may retain time limits from previous rules that required an acknowledgement of the complaint within 5 business days, settlement within 4 weeks if possible but definitely within 8 weeks.)

A consumer (or someone acting on their behalf) is entitled to inform the firm of their complaint in a number of ways, for example, by letter, by email, by phone or in person.  Therefore, firms must make sure all relevant staff can recognise a complaint and know how the complaints procedure works.

The FOS won’t consider a complaint against a firm until that firm has first had the opportunity to deal with it itself but it can look into any complaint that a firm has not been able to settle to the consumer’s satisfaction – or that it has failed to settle within the required time limits.

So, FOS can become involved after issue of the firm’s “final response” letter or eight weeks, whichever comes sooner.

What is the “ombudsman’s consumer leaflet”?

The FCA rules require a firm to send out the FOS’s consumer leaflet, “Your complaint and the ombudsman”:

  • when it sends the final response to the complaint; or
  • if it runs out of time and is not in a position to send the final response.

Firms must not send out photocopies of the consumer leaflet or hard-copy print-outs of it from the FOS website.

How does the FOS resolve complaints?

The FOS is an informal alternative to the civil courts – and takes a different approach to resolving disputes.  They generally settle complaints on the basis of the paperwork that complainants and businesses send to them, rather than having face-to-face meetings.  Unlike the courts, they are not limited to looking only at the issues highlighted in the complaint.  Their approach is ‘inquisitorial’, which means they can ask questions to get to the real facts of the case, rather than focus just on the issues presented.

Generally, FOS will first try to settle the dispute informally through mediation or conciliation. This can be quicker and more efficient than a formal investigation.  At this stage, settling a dispute informally might involve FOS contacting both parties by ‘phone to suggest a way forward or to clarify the facts and issues involved.

If the FOS is unable to resolve the matter over the ‘phone, or if the nature of the case makes a written explanation more appropriate, they will confirm the position in writing. This will give the FOS adjudicator’s opinion of the case and set out how, in the adjudicator’s view, the case should be resolved.

FOS decisions are based on what they believe is fair and reasonable in the circumstances of each individual case. They take into account the law, rules, codes and good practice that applied at the time of the event complained about.

In most cases, both the complainant and the business accept the adjudicator’s view and the complaint is then settled. If matters remain unresolved, either side may ask for a review and final decision by an ombudsman. This only happens in about one in ten cases and is also the stage where any request for a hearing would be considered.

What amount can the FOS tell businesses to pay out?

The FOS can tell firms to pay a complainant for financial loss and/or pain and suffering, damage to reputation, and distress and inconvenience. The maximum amount (or ‘award’) the FOS can instruct firms to pay is £150,000 (£100,000 for complaints received before1 January 2012).  It can also direct a business to take appropriate action, such as to apologise or correct records and can also award costs (although this happens very rarely).

Does a business have to comply with a FOS decision?

Yes.  If the complainant accepts a FOS decision, it is binding on the firm.  The rules require businesses to comply promptly with any ‘money award’ or ‘direction’ that the FOS makes. Firms must also comply promptly with any settlement they may have agreed to make at an earlier stage of our process.

If necessary, the consumer can go to court to enforce a FOS decision and the relevant regulator may take into account any failure by the firm to comply with a FOS decision.

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