Financial Ombudsman Service
The Financial Ombudsman Service FOS was established in 2000, and given statutory powers in 2001 by the Financial Services and Markets Act 2000, to help settle disputes between consumers and UK-based businesses.
FOS can deal with complaints from consumers about most financial matters including, for example: banking, insurance, mortgages, pensions, savings and investments, credit cards and store cards, loans and credit, hire purchase and pawnbroking, financial advice, stocks, shares, unit trusts and bonds.
From November 2009 money-transfer operators also came under the Ombudsman's remit.
Before the Ombudsman can step in, the consumer must first give the business they are unhappy with the opportunity to investigate the complaint itself - before the Ombudsman service can decide on the dispute. The business has a maximum of 8 weeks to resolve the complaint. If they do not resolve it within 8 weeks or the consumer is not happy with the response, then they can refer the complaint to the Ombudsman service.
The Ombudsman has the authority to request or require a company to offer financial compensation, correct a consumer's credit file, or offer an apology, as a means of dispute resolution.
The Ombudsman makes decisions on the basis of what it believes is fair and reasonable in the particular circumstances of each case. In making decisions on individual complaints, the law requires the Ombudsman to take into account: relevant law and regulations; regulator's rules, guidance and standards; codes of practice; and (where appropriate) what he/she considers having been good industry practice at the relevant time.
The Financial Ombudsman Service publishes the proportion of complaints it upholds in favour of consumers. Across all complaints in 2013/2014 the Ombudsman found 58% in favour of consumers. The Ombudsman was set up by parliament to be an impartial and independent body, though its decisions can be criticised by the side that loses.
Independent commentators acknowledge that the Ombudsman service is a valuable free service for consumers - although those who feel they have "lost" a complaint might understandably feel let down and want to question the Ombudsman's impartiality. Some consumers have questioned the amount of redress awarded by the Ombudsman while many businesses expect the Ombudsman to apply the compensation cap rigidly and lobbied against the increase (in January 2012) from £100,000 to £150,000 in the maximum compensation the Ombudsman can tell a business to pay.
Various websites have been set up to complain about the Financial Ombudsman's partiality - usually by people who disagree with Ombudsman decisions.
Budget and staffing levels
The entire Ombudsman staff in 2007 (including a substantial number of ancillary staff) was 960. They managed to handle 627,814 initial enquiries and close 111,673 cases which had been sent to for adjudication. The BBC reported in September 2007 that the Ombudsman planned to reduce staff numbers to 600, reflecting the decline in mortgage endowment complaints. By December 2009 Ombudsman staff had increased to over 1,000 - reflecting a substantially increased workload of 200,000 cases. Currently there are 4,500 people working at the Ombudsman – reflecting a substantially increased workload of over half a million cases last year (2014/2015).
Staffing levels at the Financial Ombudsman Service fluctuate - as does the budget year-on-year - to match the volume of disputes it is dealing with. The number of staff required - and forecasts for complaints volumes and workload - are consulted on publicly each year in the Ombudsman's corporate plan and budget.
Status of Ombudsman decisions
Around 90% of the disputes that the Financial Ombudsman Service resolves are settled at earlier informal stages, without the intervention of an Ombudsman. An Ombudsman's decision is the final stage of the Financial Ombudsman Service's process. If the consumer with the complaint accepts a final decision, it is binding on both parties and enforceable in court.
But if the consumer chooses not to accept an Ombudsman's decision, their legal rights remain unaffected and they can take the matter to court instead – subject to any requirements set by the courts. However, independent commentators generally recommend that consumers should use the Ombudsman service rather than the courts as the outcome of court cases can be unexpected, disappointing and costly.
However, there have been judicial reviews against the Ombudsman, brought by financial services companies who have to accept the Ombudsman's decisions which are binding in law.
For example, in January 2011 the British Bankers Association – on behalf of a number of high-street banks – brought a judicial review against the Ombudsman and the FSA on the approach to PPI complaints handling. The High Court rejected the banks' challenge and endorsed the approach taken by the Ombudsman and the FSA. The difficulty in winning a judicial review is that the Financial Services and Markets Act 2000 which led to the establishment of the Financial Ombudsman Service requires the Ombudsman to make decisions "by reference to what is, in the opinion of the Ombudsman, fair and reasonable in all the circumstances of the case".
In a judicial review of an Ombudsman's decision brought by an independent financial adviser (IFA), the judge further clarified that the Ombudsman is "free to make an award different from that which a court applying the law would make". This means that a litigant has to surmount the very high hurdle of proving that the entirety of the Ombudsman's decision was so unfair that no right minded person would have made a similar decision. This is referred to as the Wednesbury unreasonableness principle which applies to any application for judicial review under made due to the irrationality of the decision.
The board of the Financial Ombudsman Service is appointed by the Financial Conduct Authority – and the appointment of the chairman is approved by HM Treasury. The board's role includes guarding the independence of the Ombudsman - from undue influence by the financial services industry and trade bodies, regulators, consumer groups and government. Board members are non-executive - they have no involvement in individual complaints.
The Ombudsman can be asked to appear before the Parliamentary Treasury Select Committee who can be contacted by the consumer's MP.
In November 2011 the Financial Ombudsman Service became covered by the Freedom of Information Act.