2.Main Content
Money and Tax
This section describes the ADR options available for complaints and disputes about money, tax and financial services.
More information is given below on:
Debt
Financial services
Mortgage-related debt problems
Tax
For ADR options for consumer problems generally, see Consumer Affairs.
For ADR options for disputes about social security benefits and tax credits, see Benefits.
For more about debt and money problems, see Advicenow. From this site you can search for the best websites giving information and advice on debt and other money problems. You can also download free leaflets on problems such as tax credit overpayments, bailiffs and debt collection, or identity theft.
If you need personal advice on dealing with debt, National Debtline runs a free helpline on debt problems on 0808 808 4000.
Another source of free advice on debt is the Consumer Credit Counselling Service.
Debt
If you are in debt, or if you are owed money, there may be two types of problem:
- there is no dispute about liability for the debt, but you need to sort out how and when the debts will be paid
- there is a dispute about whether the money is owed or not
If you have the first type of problem, then ADR is not likely to be particularly helpful. If you owe money, then you or your adviser can negotiate repayments with your creditor. If someone owes you money, you can either negotiate with them, or use the small claims court (for a debt of under £5000) to try to reclaim what you are owed.
If there is a dispute about whether money is owed or not, then some form of ADR may well be an option to think about. For example, if a consumer is unhappy about a product or service, and so refuses to pay the full amount, or to pay at all, then it could be helpful to use mediation to try to sort out a solution that both parties can accept. Or if there is a dispute about whether a bank charge is justified, you could consider asking the Financial Ombudsman Service to investigate. Both of these options are outlined here.
Mediation
No mediation providers offer a service specifically for debt problems. Providers of mediation in Civil and commercial disputes may be able to help, but unless the debt is very large, the cost will probably be disproportionate. Many county courts have attached County Court mediation which will offer mediation for free, or for a very moderate fee.
Whether or not mediation may help in your case can be difficult to decide. Many money advisers believe that penalising creditors who refuse to negotiate settlements is likely to be far more effective than mediation. However, if negotiation is stalled, or if court is threatened, mediation could be an option. Courts will also expect you to consider mediation before making a court application, and can impose cost penalties if you refuse. The case of Burchell v Bullard 2005 is about a dispute between a couple and their builder over the quality of his building work. In this case, the judge was very critical of both parties for running up high court costs, and not using mediation to sort out their disagreement.
Some of the reasons to consider mediation are that:
- negotiation though a money adviser has not so far resulted in a settlement
- the value of the claim exceeds the limit of the small claims procedure
- it is important to preserve an amicable relationship between the parties
- the parties want to keep their dispute and settlement private
- there is the possibility of a quicker resolution of the dispute
Ombudsmen
Sometimes disputes about debt arise because of a disagreement about a bill; for example, you may be unhappy with bank charges, and refuse to pay.
One of the most user-friendly ways to deal with this kind of dispute with a financial services provider, is to go to the Financial Ombudsman Service (FOS). The FOS has issued guidelines on how lenders should deal with debt recovery, which include:
- making information available in plain English
- agreeing an action plan with the customer
- not subjecting customers to harassment or undue pressure
You can read the guidelines in full on the Financial Ombudsman Service website.
If the lender does not follow the guidelines, or if you cannot resolve your dispute directly, then the FOS will investigate the problem, try to mediate an informal agreement between the two sides, or if that doesn’t work, make a formal adjudication. You can phone the FOS to talk about whether your dispute is suitable, and get advice about how to sort it out yourself if possible. There is an outline of how the FOS works on this site – go to the Financial Ombudsman Service page.
Other debt problems
Unresolved complaints about the Inland Revenue go to the Adjudicator .
Complaints about social security benefits need to go to the relevant body (see Benefits). An ombudsman such as the Parliamentary Ombudsman or the Local Government Ombudsman can consider complaints about mistakes in the administration of benefits, such as Housing Benefit, which can lead to arrears.
Complaints about child maintenance can go to the Child Support Agency and, if unresolved, to the Independent Case Examiner .
Complaints about a debt arising from an unpaid bill from a telephone or internet service provider can go to either the Office of the Telecommunications Ombudsman (Otelo) or the Communications and Internet Service Adjudication Scheme (CISAS).
Disputes over disputed estate agents charges can go to the Estate Agents ombudsmen.
Generally ombudsmen ask complainants to pay any undisputed part of a bill, and ask companies to hold off on any debt collection of the disputed part of the bill, until the ombudsman's investigation is completed.
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Financial services
There are a number of ADR schemes available for resolving disputes about financial services such as bank accounts, mortgages, insurance, pensions, loans and credit. Most companies offering these financial products come under the Financial Ombudsman Service (FOS).
There are a few other similar schemes dealing with disputes with financial services providers not covered by the FOS, such as:
The Finance & Leasing Association Conciliation and Arbitration Scheme (details on the Finance and Leasing Association website)
The Pensions Advisory Service
The Pensions Ombudsman
Ombudsmen
The Financial Ombudsman Service (FOS) was set up in 2001 to bring together the work of a number of bodies that had previously handled complaints about financial services, such as the Banking Ombudsman, Insurance Ombudsman and Building Societies Ombudsman. All firms that are regulated by the Financial Services Authority (FSA) are required to be members of the scheme and must comply with the ombudsman's decisions. Other firms can join the FOS on a voluntary basis. The FOS is free to the consumer. Consumers also retain the right to take the case to court if they are not happy with the FOS outcome.
The largest single category of complaints dealt with by the FOS in 2005-06 was mortgage endowment policies. From 2007 the FOS will also deal with complaints about consumer credit providers.
The Pensions Ombudsman handles complaints about occupational and personal pension schemes. Its decisions are binding on both the consumer and the pension provider.
Arbitration
Arbitration is an option for some financial services disputes, particularly where the providers are currently outside the scope of the FOS. A number of independent arbitration schemes are run by the Chartered Institute of Arbitrators. They tend to be a low-cost and relatively quick route to resolving a dispute, but there is little information available about typical outcomes. Also, unlike the Financial Ombudsman Service's decisions, arbitration awards are binding on both the consumer and the company, so using arbitration means giving up the right to take the case to court if you are not happy with the outcome. Detailed information about each scheme can be found on the IDRS website.
Most of these arbitration schemes do not involve attending a hearing. Arbitrators make their awards on the basis of documents submitted by the parties. An arbitrator's award will be based on the legal responsibilities of the firm and the consumer. The arbitrator has little scope for flexibility in the way he or she reaches a decision, and unlike ombudsmen cannot consider informal codes of conduct and standards of good practice within an industry.
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Mortgage-related debt problems
Disputes about mortgage debt and arrears all too often turn into possession proceedings, and it might be that the court hearing for repossession is the first time the parties have discussed how and when the debt can be repaid. Also, changes in the housing market can affect lenders' decisions about whether to pursue a possession or negotiate on the debt.
Mediation
Earlier provision of mediation could help prevent many unnecessary possession proceedings. However, this isn't an area where mediation is widely used, and there is no dedicated mediation provision for this problem. Mediation is most likely to be identified as appropriate where there is some fault on both sides - eg where the bank has made administrative errors. It can be used in cases where liability for the debt is disputed, and for those where it is not.
Mortgage shortfall disputes (where a property has been repossessed and sold by the lender, resulting in a shortfall payable by the borrower) could also benefit from use of mediation, but again this is rarely used.
In cases where the shortfall results in a demand - sometimes many years later - from the lender, an offer to mediate from a lender should be treated cautiously, and legal advice always taken. This is because there is a question over whether the limitation period under the Limitation Act 1980 for such demands is six or twelve years. If it has been more than six years since the property was repossessed, a client would be ill-advised to mediate the dispute. For one thing, mediation encourages open discussion, and if a client inadvertently acknowledges the debt, another six years start to run from the time the debt is acknowledged.
Ombudsmen
Going to the Financial Ombudsman Service (FOS) is well worth considering in mortgage shortfall cases. The ombudsman is also be an appropriate option where the lender has delayed in contacting the borrower with a demand after the sale of the property, resulting in hardship to the borrower. The FOS has a large customer contact division which deals with calls from the public about disputes with financial services providers, so it is always worth calling their helpline to talk about whether they can help with your problem.
The FOS provides guidance on its approach to common problems in its monthly publication "ombudsman news" - available on the Financial Ombudsman Service website. The FOS also publishes briefing notes on the principles it uses when making decisions, such as what the FOS perceives to be reasonable and fair grounds for the settlement of disputes. This guidance can be useful for advisers in settlement negotiations with lenders on behalf of their clients.
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Tax
Complaints about HM Revenue & Customs (HMRC) can go to the Adjudicator . HMRC deals with income tax, national insurance contributions, child benefit and tax credits.
Like many similar bodies, the Adjudicator's role is to ensure that the proper procedures were followed in handling a complainant's case. The Adjudicator cannot consider complaints about the actual amount of tax a complainant has been asked to pay.
If you are still not happy with the way a complaint has been resolved after it has gone to the Adjudicator's Office, you can complain, via a Member of Parliament, to the Parliamentary Ombudsman.
For disputes between charities and HMRC (or other central and local government bodies), mediation is available from the Compact scheme operated by the Centre for Effective Dispute Resolution (details on the CEDR website).
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Revised January 2007
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