The Financial Ombudsman Service (FOS) and the Labour Party have expressed support for introducing case fees for claims management companies (CMCs) that bring complaints to the FOS. This proposal, backed by Treasury Economic Secretary Tulip Siddiq, aims to address growing concerns about CMCs filing large volumes of complaints, often without solid evidence.
Whether this affects solicitors (like us) and claims management companies has yet to be seen. However, whilst we understand the reasoning behind this decision, it does present significant challenges for both CMCs and their clients.
What’s the Plan?
Under this plan, CMCs could be required to pay a fee for each complaint they submit to the FOS. The proposed fee structure would see CMCs charged £250 to file a complaint, which could be reduced to £75 if the case is ruled in the claimant’s favour. This move is intended to discourage the submission of poorly evidenced claims that burden the FOS and slow down the complaint resolution process.
Why Is It Happening
The FOS and the Treasury have both raised concerns that some CMCs are “weaponising” the complaints process by submitting a high volume of template-based or poorly documented claims. Without a financial deterrent, there has been little to stop CMCs from submitting weak cases, which impacts the FOS’s ability to handle genuine complaints efficiently.
Labour’s Tulip Siddiq confirmed the government’s commitment to bringing this legislation forward, a measure initially proposed by the former Conservative government. The decision to charge CMCs for complaints aims to ensure that only well-supported cases reach the FOS, ultimately allowing the organisation to process legitimate claims more effectively.
Fee Caps for CMCs
The proposed legislation aligns with the Financial Conduct Authority’s (FCA) recent regulatory caps on CMC fees. For example, in cases with redress between £1,500 and £9,999, CMCs can charge a maximum of £2,500 or 25% of the awarded amount, whichever is lower.
The Treasury’s letter to the Association of Consumer Support Organisations also acknowledged ongoing issues with complaint processing times. Siddiq stressed that it is essential for companies to handle complaints swiftly and in line with legal and regulatory standards. She further confirmed that the government will continue to collaborate with regulators and the FOS to strengthen the effectiveness of the regulatory system, ensuring CMCs operate responsibly within it.
When Is It Being Debated?
This plan, set to be debated in both Houses of Parliament, represents a proactive step towards improving the efficiency of the complaint-handling process at the FOS, ultimately helping consumers by ensuring faster and fairer resolutions.
However, this blanket approach will not help all consumers who need to escalate complaints to the FOS.
The Plan
Our Thoughts…
This plan makes perfect sense in theory. However, for those CMCs acting in the best interests of their clients, the £250 fee could prevent them from pursuing some claims due to the financial burden it will place on them, meaning clients may be forced to attempt the claim themselves.
This may be relatively straightforward when dealing with high-volume claims such as car finance (for clients who are capable). However, a pension or investment claim is far more complex.
It’s important to remember that when dealing with the FOS, you have a financial institution (experts) on one side and a consumer on the other. Often, the consumer needs experts to help, and restricting that access could deter eligible claimants.
We agree that there needs to be change, but a blanket approach is seldom beneficial to all.
Why It’s Happening
Our Thoughts…
We believe that this policy should be directed at the firms doing the damage, not at firms who are following procedures to the letter.
A simple three-strike policy would allow the FOS to quickly identify representatives that are not adhering to standards and place them onto a fee-charging structure.
Fee Caps
We already adhere to the new Solicitors Regulatory Authority (SRA) standards with our fee structure, but when it comes to FOS claims, here are some things that need to be considered:
1- The FOS Does Not Always Get It Right
Often, the FOS cannot enforce certain complaints or simply doesn’t deliver the decision we expect. When this happens, the only option is to take legal action.
Legal action comes with added costs for consumers, including but not limited to:
- Court fees
- Expert witness fees
- Barristers’ opinions
- After-the-event insurance (to protect the consumer in the event they lose)
We have therefore always sought to exhaust all routes to claim, including the FOS, before taking legal action. However, for clients with lower-value claims, under this proposed new regime, it may no longer be viable to use the FOS.
2- Cases Are Only Brought to the FOS When a Satisfactory Outcome Cannot Be Reached
Imagine you are a regulated firm, and a customer makes a valid complaint that you have not managed their pension properly. You have a duty to provide the information requested by their solicitor within 30 days, but you don’t.
They ask for it again, and you ignore it again.
Eventually, the customer and their solicitor will have no choice but to escalate the complaint to the FOS. However, they cannot afford £250, and the solicitor cannot pay the £250 as they cannot assess the claim without the evidence you refuse to provide.
This decision could place more power into the hands of the firms that are at fault!
3- The FOS Does Not Allow Us to Present Evidence
When a case is brought to the FOS, we submit the details of the claim and provide as much information as possible. However, the FOS insists on gathering its own evidence from the firm.
Whilst we understand their need to remain impartial and validate evidence, we believe that providing provisional decisions based on the evidence we are able to supply from our investigations would greatly improve the efficiency of their service. It would then be a matter of validating the evidence rather than requesting, waiting, and then analysing.
When dealing with claims involving multiple parties, evidence often goes out of date. Using the evidence available at the start would allow them to request further information and move cases through the process more quickly, including rejecting spurious claims more immediately.
Our Conclusion
We support anything that will help improve the efficiency of the claims process, but we are fundamentally opposed to anything that may prevent us from representing clients who need our help.
Introducing standards for representatives and using case fees as a deterrent for firms that fail to comply would be a more reasonable compromise and would not be difficult to administrate.
Otherwise, it could appear to be a way to generate fees to the detriment of some consumers. In our experience, it is often the small but complex claims that come from the most vulnerable clients.
The biggest risk is that firms could use this as a way to deter claims being brought against them via the FOS. With the statute of limitations on financial services claims, this could allow firms that have let clients down to avoid being held to account.
As it stands today, we can still make complaints to the FOS without case fees. So, if you have a complaint against a pension provider, financial adviser, or any regulated party, why not get in touch today?
