Credit, Collections & Insolvency News
Financial Ombudsman Service (FOS) has announced that professional representatives will be charged £250 to refer a case to the service,
FOS says professional representatives can bring ten cases to the service for free each financial year. After that, every subsequent case they refer will be chargeable. They will receive £175 back in credit if the complaint is found in favour of the consumer they represent, reducing the charge they pay to £75.
A large proportion of complaints referred to us in recent years have been driven by professional representatives who either charge consumers or take a percentage of any redress awarded. Currently, financial service firms pay a £650 case fee for complaints against them that is investigated, while professional representatives do not pay a case fee.
Under the new rules, if a complaint referred by a professional representative is not upheld or is withdrawn, the financial business against whom the complaint was made will pay a reduced case fee of £475, instead of £650.
The move aims to make the funding arrangements for us fairer and to encourage professional representatives to submit better-evidenced complaints, considering their merits more diligently before referring them.
James Dipple-Johnstone, Interim Chief Ombudsman at the Financial Ombudsman Service, said “We’ve seen more cases brought by professional representatives, but fewer of these cases leading to a better outcome for their clients. Currently there is little commercial incentive for representatives to ensure the complaints they bring are well-founded or have merit. As a not-for-profit service, we expend our finite resources handling thousands of withdrawn or abandoned cases, which can lead to longer wait times for other customers.
“The charges we are introducing from April will bring better balance to our fee model, helping us to resolve disputes quickly and ensuring a wider contribution towards our running costs.”
Between April and December 2024, around 47% of complaints submitted to us were from professional representatives. The professional status of these firms should mean that these complaints have a considerably higher success rate, compared to consumers who use the service without professional representation. However, only 26% of cases brought by professional representatives were found in favour of the consumer, compared to 38% of those brought directly by consumers for free.
Dipple-Johnstone added “Professional representatives can play an important role in resolving financial disputes by providing high-quality, good value services to those people who make an informed choice to employ them. But it is important for consumers to know that it is and will remain free for them to bring a complaint directly to our easy-to-use service, and those who do so can keep all of any reward we make.”
The fee is part of a wider range of measures being brought in to encourage firms to submit well-evidenced complaints. The introduction last year of an enhanced digital service means professional representatives must now provide relevant evidence at the earliest stage – speeding up processes and enabling us to dismiss inappropriate complaints.
The Baroness Manzoor CBE, Chairman of the Financial Ombudsman Service, said “I believe this marks an important and significant milestone in the financial services landscape, enabling us to continue our vital work in resolving disputes for both complainants and firms quickly and with minimum formality.
“We will continue working closely with all stakeholders to ensure a smooth transition and to support CMCs and other professional representatives throughout this process.”
Stephen Haddrill, Director General of the Finance & Leasing Association said “The introduction of charging is a most important step forward. CMCs are major businesses that should not have a free ride, not least because they have driven a compensation culture that damages investor confidence in the UK and threatens growth. However, today’s decision on the level of the charge is unsatisfactory and we will continue to call for it to be increased.
“Professional representatives should be charged on the same basis as lender firms to deliver a fair and equitable approach. And the suggestion that lenders must pay the lion’s-share of the case fee (£475) even when they are not at fault runs counter to FOS’s aim of applying a ‘polluter pays’ principle. We know of no other example where the loser in a case involving two businesses pays less than the winner.”