Financial Ombudsman Service
This page contains information about the Financial Ombudsman Service, including:
What it does
Advantages and disadvantages
What complaints are eligible?
Cost
Timescale
Procedure
Outcomes
Satisfaction rates
What it does
The Financial Ombudsman Service (FOS) investigates complaints about most financial products and services provided in or from the UK. This includes insurance, endowment mortgages, bank accounts and investments.
The businesses it will investigate include banks, insurance companies, building societies, mortgage providers, investment companies, stockbrokers and all other financial services providers regulated by the Financial Services Authority (FSA).
The most recent additions to the jurisdiction of the FOS include:
- mortgage lenders and brokers (October 2005)
- National Savings and Investments (September 2005)
- insurance brokers (January 2005)
- complaints about consumer credit and loans, including debt colection on behalf of consumer credit lenders (April 2007)
- money transfer operators (November 2009)
Complaints about occupational pension schemes are dealt with by the Pensions Advisory Service (OPAS) or the Pensions Ombudsman.
This information applies in England and Wales, Scotland, and Northern Ireland.
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Advantages
- it is free
- it is private and confidential
- it is relatively quick
- it is independent of the companies it investigates
- there is no need to attend a hearing
- the decision is binding on the company but not on the consumer, so the consumer can still go to court if dissatisfied with the outcome
Disadvantages
- the complaint might not be within the jurisdiction of the FOS and so may not be eligible for investigation
- the complaint may not be upheld
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What complaints are eligible?
The list of types of complaints is long and is available on the FOS website. Among the areas the FOS can consider are:
- travel, car and home insurance
- insurance brokers
- life and private medical insurance
- mortgages and mortgage brokers
- endowment mortgages
- savings and investments
- financial advice
- banks and building societies
- unreasonable bank charges for unauthorised overdrafts
- credit unions
- credit cards
- consumer credit lenders
- debt collection businesses acting on behalf of lenders
- money transfers (in or from the UK)
You should first make your complaint to the business responsible, and give them a chance to put things right. If they do not respond within eight weeks, or if you are not happy with their response, you can take your complaint to the FOS. This must be within six months of the firm’s final letter, if you have one.
Bear in mind that the FOS cannot consider complaints about:
- a ‘commercial judgement’, such as a provider's decision to refuse a loan or what insurance premium to charge
- the actions of someone else's insurance company (for example, after a car accident)
- the way an investment has performed
In 2009-10 the FOS received 925,095 initial enquiries by phone, email and letter. Of these, only 163,012 became cases that went on to be considered by the FOS, or about one in six enquiries. There are two main reasons for the vast discrepancy between the number of initial enquiries the FOS receives, and the number of cases they actually take on:
- Many enquiries are made too early, and in these cases the FOS will forward the complaint directly to the business concerned, so that they can deal with it directly.
- In many cases consumers have already made a complaint, and have been offered some form of redress by the business; in these cases, FOS staff will advise them on whether this offer is fair and reasonable.
The FOS publishes a monthly newsletter that contains useful information and case studies and identifies trends in complaints. It is available on the Financial Ombudsman Service website.
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Cost
The scheme is free to complainants.
The FOS believes strongly that you don’t need legal representation to make a complaint, so they won’t include the cost of legal advice in any compensation they award. The FOS is particularly concerned about the one in five complaints which are made on behalf of consumers by claims management companies. Consumers might well find that any compensation they get will be reduced, as the claims management companies deduct their costs from the final award.
If you do want help with your case, the FOS will accept a complaint on your behalf from a friend, an adviser, or a CAB worker. You can get free, independent advice from Consumer DirectGov.
The Hunt report, published in May 2008, recommended that the FOS should have additional support staff to help consumers, especially vulnerable consumers, through the whole process.
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Timescale
You need to make your complaint within six months of receiving a final response letter from the firm. Overall, the complaint should be made within six years of the event you are complaining about. If you didn’t realise there was a problem until after this time, you must complain within three years of the date when you became aware of it. The FOS has some limited discretion to consider complaints outside these time limits in exceptional circumstances.
In 2009-10, the FOS resolved 38% of cases within 3 months, 67% within 6 months, and 89% within a year.
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Procedure
The first point of contact is the customer contact division. You can phone, write or email, and a member of the FOS staff will discuss the problem with you, and advise you how best to proceed. All the contact details are on the Financial Ombudsman Service website.
The vast majority of cases (more than 90%) are resolved at a relatively early stage by FOS adjudicators through guided mediation, informal recommended settlements, or adjudications. The rest are reviewed by an ombudsman who issued a final decision.
Guided mediation and informal recommended settlements
Initially FOS adjudicators will attempt to negotiate a settlement between the two parties through ‘guided mediation’. If the two sides cannot agree, the adjudicator will issue an informal recommended settlement. Again, it is up to each party to decide whether or not to accept this. If they are not happy, then the case goes on to adjudication.
Adjudication
In cases where the informal recommendation is not accepted by both parties, the adjudicator will produce a formal adjudication – a document setting out the FOS recommendations about whether the complaint should be upheld or not. If they don’t agree with the adjudication, either side can ask instead for a review and a final decision by an ombudsman.
Ombudsman decision
About 8% of complaints are fully investigated and are the subject of a formal ombudsman report. This contains a decision about the complaint, and gives the reasons for the decision. It is up to the complainant to decide whether to accept this – it is binding on the firm complained about if the complainant accepts the ombudsman’s decision. This is the final stage of the ombudsman process.
To see how a typical case might work, have a look at Edwina’s story
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Outcomes
In each case settled by the FOS, they record whether the final result differs from the position the business took before the FOS got involved. This produces one of two outcomes:
- The FOS ‘agrees with the consumer’s complaint’ – which means that the FOS thinks that the business either failed to accept it had done something wrong, or failed to offer appropriate redress
- The FOS ‘agrees with the business’s response’ – meaning that the FOS thinks that the business either did nothing wrong, or did make a mistake, but admitted it, and offered sufficient redress to the person complaining
The proportion of cases in which the FOS agrees with the consumer’s complaint varies considerably, depending on the type of complaint. Across all types of complaints, in 2009-10 the FOS agreed with the consumer’s complaint in 50% of cases. The smallest proportion of complaints upheld occurred in current accounts, where the FOS agreed with the consumer in only 20% of cases. There were two types of complaint where the FOS came down heavily on the consumer’s side: in complaints about payment-protection insurance (PPI) (89%) and credit cards (68%).
When the FOS finds in favour of consumers, the usual remedy is to require the financial services provider to put them back in the position they would have been in if the business had not made a mistake. The FOS can also award up to £100,000 in additional compensation, though most awards are much smaller – usually between £150 and £500.
FOS highlights that in complaints involving debt collection businesses acting on behalf of consumer credit lenders, even if FOS finds in favour of the consumer it is unlikely to award a complete write-off of the consumer's debt. FOS says that sometimes they have not been able to achieve as prompt a resolution as possible because of consumers' demands for a write-off of the debt. It is important for advisers to help their clients have realistic expectations of what might be awarded.
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Satisfaction rates
The FOS carries out a regular survey of customer satisfaction. According to the FOS annual report for 2008-09:
- 61% think that FOS decisions are fair and unbiased (though 20% disagree)
- 63% think that the FOS gets to the bottom of complaints and deals with the issues thoroughly
- only 37% think that the complaints are resolved in an acceptable length of time
It is clear that how consumers think about the FOS is affected by the outcome of their complaint. Of those who felt they had ‘won’, 83% were satisfied with the FOS. Of those that felt they had ‘lost’, only 42% were satisfied.
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Complaints by company
In September 2009 FOS for the first time began to publish details of the numbers of complaints made, and the percentage of complaints upheld, against named financial service providers. This publication follows an extensive review of FOS’s accessibility and transparency, and a subsequent consultation with the financial services sector.
The report names those business which were the subject of at least 30 new cases during the six-month period covered by the report. Therefore businesses generating a smaller number of complaints are not identified in the complaints data. In the period between 1 January and 30 June 2009, 69,841 new complaints were received; the majority (87%) related to just 142 firms.
That data is shown in the FOS complaints data tables, which show volume of cases and the uphold rate against each firm. Between 1 January and 30 June 2009, overall 59% of complaints were upheld – ie decided in favour of the consumer; an ‘upheld’ case is defined as one where there was a change in outcome in favour of the consumer. Across the different sectors covered by FOS, the uphold rate ranged from 41% of mortgage-related complaints to 70% of general insurance complaints. An outcome in favour of the consumer could include a £1 increase in compensation above what was offered by the firm, up to £100,000.
The complaint numbers are not presented with any context in terms of relative market share of the firm or number of customers. However, the uphold rate gives some indication of how well the firms are performing that is not dependent on size or number of complaints. A lower uphold rate means that the ombudsman agreed with the firm’s decision in the majority of cases.
As an example, comparing the January–June 2009 data on several well-known high-street banks in terms of uphold rate can be illuminating:
HSBC 2,177 complaints uphold rate of 60%
NatWest 2,379 complaints uphold rate of 60%
Barclays Bank 8,283 complaints uphold rate of 71%
Lloyds TSB 6,947 complaints uphold rate of 81%
May 2010
