The Financial Ombudsman Services is generally aimed at consumers – private individuals – but it can help small businesses or “micro-enterprises” as defined by the EU with a turnover under €2m and under 10 employees too.
The Financial Ombudman Services considers independently – free of charge – complaints about financial products. It can only arbitrate and makes awards if appropriate. The service is paid for purely through a levy on financial businesses and case fees payable by businesses being investigated. No fees are charged to consumers or small businesses that complain.
The ombudsman has the power to deal with matters such as banking, insurance, pensions, savings, investments, credit cards, loans, hire purchase, stocks and shares as well as financial advice. The ombudsman can also look at most complaints that involve a consumer credit transaction. That includes lending and hiring; other activities such as debt collection and credit brokerage; and those where credit is a secondary activity such as retailing.
Under Financial Conduct Authority rules regulated businesses are required to have in place an in-house complaints handling procedure to help resolve complaints before they escalate. Failure to operate a complaints handling procedure could involve a range of sanctions depending on the offence.
Every business selling financial products should publicise, ideally in writing at the point of sale, its complaints procedure; it should supply a copy of this procedure if requested and automatically supply a copy when a complaint is received.
The regulator requires the management of the financial services company to have a policy in place to allow consistent and fair treatment of all complaints; as well as offering and honouring redress should a complaint be upheld and the redress be accepted by the upset party. The redress can be financial, it could be an offer to correct a credit record or it could be something as simple as an apology.
Making a complaint
The ombudsman will only consider a case once the financial organisation concerned has had a chance to deal with the complaint being made. However, if a resolution is not forthcoming, the consumer or business is asked to put the matter in writing. As far as the complainant is concerned, there is no need to take legal advice at this point in time. However, the ombudsman encourages complainants to explain clearly, in their own words, what has gone wrong and what they would like the responsible organisation to do to put things right. However, this doesn’t mean that the complainant cannot later appoint a legal advisor.
If the matter cannot be resolved amicably, the complainant may make a formal complaint. But before any complaint can be progressed through the ombudsman process, it has to pass various tests such whether the selling business and product is covered by the ombudsman; whether the complaint is covered – for example, matters involving commercial judgement are not; when the event occurred as time limits apply; and the relationship between complainant and the business.
Time limits are important. If a complaint arises financial organisations need to send the complainant a written acknowledgement as soon as possible; they need to keep the complainant informed of the progress of the complaint and issue a final response within eight weeks of the initial complaint. The letter needs to tell the complainant that if they do not agree with the decision they can go to the ombudsman within six months of the date of the final response. Complainants can also lodge a complaint within six years of the event that causes the upset, or three years when the complainant could have reasonably known about it.
The process is non-binding, that is, the complainant doesn’t have to accept the ruling of the ombudsman, they can still decide to pursue a claim through the courts. However, once the decision has been accepted, it does become binding on all sides.
A quarter of the cases that go to the ombudsman will be resolved in under three months, and almost 80% within a year. But in some cases, such as payment protection insurance, it will take a lot longer.
It’s also worth noting that the ombudsman will consider complaints from those based overseas. The issue is the location of the selling business not the country of residence or nationality of the person or business making the complaint.
Powers of the ombudsman
The ombudsman’s mantra is informal mediation. Should the case prove complex the service has a two-stage process that complainants can follow. Firstly, an adjudicator will review the case and offer their opinion on the problem. If the adjudicator thinks the business has done something wrong they will tell it what to do to put things right. If they think that the business has acted reasonably, they will explain the reasons why to the complainant. If thecomplainant disagrees with the decision they can request to have an ombudsman review it and issue a final decision on the case. A very small number of cases lead to a review and final decision by the ombudsman.
In terms of awards, the ombudsman can order a payment to the complainant for the loss they’ve suffered, reputational damage as well as trouble and upset up to a maximum of £150,000 (£100,000 for complaints brought 1 January 2012).
The ombudsman website is packed full of useful information which, thankfully, is in plain English. Time spent looking online would be time well spent.