Understanding the Financial Ombudsman Service
In this article, we look at the Financial Ombudsman Service (FOS), focusing in particular on the process to be followed by eligible complainants and the awards the FOS can make.
This article is correct as at 10 September 2024 and is relevant to the 24/25 examinable tax year.
What is the Financial Ombudsman Service (FOS)?
The FOS provides a fair and impartial way to resolve complaints about financial services, avoiding the need for court involvement. It covers a wide range of financial issues, including banking, insurance, investments, pensions, payday loans, and debt collection.
You should, however, be aware that it is the Pensions Ombudsman who deals with any management or administration complaints surrounding personal pensions and small occupational schemes. The FOS only deals with the sale of these products.
Who can use the FOS?
The FOS will only review complaints from eligible complainants.
An eligible complainant can be:
- a consumer;
- a micro-enterprise with fewer than 10 employees and a turnover or balance sheet total of no more than 2 million euros;
- a charity with an annual income of less than 6.5 million pounds;
- a trustee of a trust with a net asset value of less than 5 million pounds;
- a consumer buy-to-let consumer;
- a small business with an annual turnover of less than 6.5 million pounds and fewer than 50 employees or a balance sheet total of less than 5 million pounds; or
- a guarantor.
In addition, the complainant must have already participated in the complaints process of the firm to whom the complaint relates, and have either been dissatisfied with the firm’s final response or not have received a final response within the 8 weeks permitted by the FCA to resolve a complaint.
FOS Timescales
Part of the FCA’s process for dealing with complaints is that firms must inform their clients that they can refer the matter on to the FOS.
The FOS’s objective is to resolve complaints and disputes as quickly as possible and any complaint must be referred to them:-
- within 6 months after the firm’s final response has been received, or
- 6 years after the event, or
- 3 years after the complainant knew or should have known they had cause for a complaint,
whichever of these is the earliest date.
In exceptional circumstances, the FOS can take on complaints after these time periods, and for complaint cases that involve pension transfers, pension opt outs, and FSAVC reviews.
Decision-Making
Once the FOS has considered the complaint and has decided on what is fair and reasonable, the decision is sent in writing to both parties. The individual must then accept or reject the outcome within the time limit specified in the correspondence. If the decision is rejected, they can pursue the complaint in court.
Awards
The maximum the FOS can award is £430,000 for complaints about actions and omissions by firms that are referred on or after 1 April 2024 and that occurred on or after 1 April 2019. They can recommend a higher figure, but this would not be binding on the firm. Lower figures apply for complaints relating to business conducted before this date.
They can also make a directions award, telling the firm what action it needs to take to put things right, awards for costs and/or interest, and awards for distress or inconvenience.
Funding
The FOS is funded by a levy paid by participating firms, plus a flat-rate case fee.
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