We have produced this guide to assist anyone who is considering making a complaint to the Financial Ombudsman Service (“FOS”). In doing so, we have drawn upon our own experience of submitting complaints to the FOS, on behalf of clients who have been variously let down by their professional advisers, insurers, banks and buildings societies.
In this guide we seek to explain:
- What the FOS is
- The types of complaints the FOS handles
- Who can use the FOS
- The time limits that apply to complaints
- The advantages and disadvantages of submitting a complaint
- How to make a complaint
- How the FOS works
- The potential alternatives to complaining to the FOS
What is the Financial Ombudsman Service?
The FOS is a government-run scheme for resolving customer disputes. It was established in 2001 under to the Financial Services and Markets Act 2000 (as amended). The rules which set out how the FOS – and other financial businesses – operate are published by the industry regulator, the Financial Conduct Authority (“FCA”). They are contained within a document known as the FCA Handbook.
The FOS offers consumers and certain businesses a free, informal and independent mechanism for resolving complaints against a wide range of businesses operating in the financial services sector. These include banks, insurance companies, financial advisers, pension providers, stock brokers and insurance brokers.
While subscription to some ombudsman schemes is discretionary, all financial businesses regulated by the FCA must submit to the compulsory jurisdiction of the FOS. In addition, and subject to making the appropriation application and paying the required fees, others can subscribe to the voluntary jurisdiction of the FOS.
What type of complaints does the Financial Ombudsman Service handle?
The FOS is able to deal with a wide variety of complaints relating to most types of financial products and services provided in the UK. This means that complaints can range from issues with bank and building society accounts, pensions and mortgages, to insurance, pay day loans, Payment Protection Insurance and debt collection. More recently, the FOS has also been accepting complaints arising out of the effects of Covid-19 and the impact caused by it upon consumers and eligible businesses.
You can find further information about the types of complaints the FOS can consider in the Complaint we can help with section of its website.
You should note that there are a range of complaints that the FOS cannot consider. These include complaints that:
- Relate to a non-UK business;
- Have been made outside certain time limits (for which see below);
- Are already the subject of court proceedings;
- Relate to a non-FCA authorised individual or entity.
Am I eligible to make a complaint to the Financial Ombudsman Service?
Access to the FOS, and eligibility to make a complaint to the FOS, is restricted to private individuals (ie consumers), micro-enterprises, small businesses and certain charities and trusts.
A ‘micro-enterprise’ is a business which (i) employs fewer than 10 people; and (ii) has an annual turnover or balance sheet that does not exceed €2 million. A ‘small business’ is one which is (i) not a micro-enterprise; but (ii) nevertheless has an annual turnover of less than £6.5 million; and (iii) has a balance sheet total of less than £5 million, or employs fewer than 50 people.
The test for determining if a business falls within the applicable threshold is determined as at the date upon which a complaint is made to the financial business and not, as is often thought to be the case, the date upon which the issue being complaining about occurred, or the date upon which a complaint is made to the FOS.
Some businesses may temporarily exceed the thresholds in place for determining whether or not a complainant is eligible. However, the FOS will have regard to the ‘two-year’ rule, which recognises that this may happen from time to time. In such circumstances, the FOS will consider the size of the business in the current trading year and also the preceding two years. It will only conclude that a business exceeds the applicable threshold if over that total three-year period it has exceeded the applicable threshold for two consecutive years.
We can help you determine if your business is eligible to complain to the FOS.
What are the time limits for making a complaint to the Financial Ombudsman Service?
In the same way that there are strict time limits for commencing civil claims for compensation in England & Wales, there are strict time limits for making a complaint to the FOS. If you make your complaint outside those time limits, the FOS will not have jurisdiction to consider it.
The general rule is that you must complain to the business or to the FOS within 6 years of the problem arising. However, the FOS recognises that a complainant may not become aware of the problem until after the expiry of 6 years and may have had no other way of discovering it. In this event, the complaint must be made within 3 years of the date upon which the problem is discovered, or could reasonably have been discovered.
The FOS expects that a complainant will contact the business in the first instance to give it the opportunity to investigate the complaint and provide its response. In most cases, a financial business then has 8 weeks to consider a complaint and provide its written response, known as a ‘final response’.
The complainant then has 6 months from the date of the final response to complain to the FOS. If the complaint is lodged outside the 6-month period, the FOS will not usually consider the complaint, unless the delay is due to exceptional circumstances (such as a serious illness), the response from the business was invalid, or the business otherwise agrees that the FOS can consider the complaint despite the 6-month time limit having expired.
In addition, small businesses can only bring a complaint about a financial business if the matter about which the complaint is being made occurred on or after 1 April 2019.
We can help you determine if your complaint can be made within the applicable time limits or if there are reasons why the time limit should be extended.
What are the advantages of using the Financial Ombudsman Service?
Some potential advantages of complaining to the FOS are that:
- The service is provided free of charge to complainants
- It is not necessary to instruct a solicitor or other legal representative or professional to use the service, although it may be prudent to do so if the matter is technical and/or complicated and/or is a claim for significant compensation
- The FOS is independent of the parties and unbiased
- The FOS is often inclined to accept a wide range of complaints and not just those relating to issues of poor service
- If the decision of the FOS is accepted by the complainant, it is binding upon the financial business
- The complainant is not bound to accept the decision of the FOS
- Submitting a complaint to the FOS does not prevent a complainant from commencing legal proceedings at any time
- It is a relatively informal, and therefore user-friendly, dispute resolution process
- It can be, but is not always, quicker than court proceedings
What are the disadvantages of using the Financial Ombudsman Service?
- The complaints handlers are lay individuals and not trained legal professionals – they do not have the legal knowledge or experience of a judge
- The process can lack transparency, with decisions based on evidence that neither the financial business nor the FOS is willing to disclose
- Unlike in civil proceedings, it is generally not possible to recover any costs incurred in obtaining legal assistance or representation in making a complaint
- The time limits for making a complaint can be very strict
- The complaints process does not extend or suspend the time for making a civil claim for compensation, so valuable time can be lost if a complaint is rejected
- Whilst potentially quicker than court proceedings, the service can still be relatively slow – a complainant can be waiting many months, and sometimes many years, for a decision
- The amount that the FOS can award by way of compensation is limited (see further below) and may not cover the full amount of the loss sustained
How do I complain to the Financial Ombudsman Service?
The first step is to contact the financial business about which the complaint is being made. This will offer the business the opportunity to resolve the matter without the need for any additional intervention. The complaint should be made within the time limits set out above.
In making the complaint, it is as well to set out each individual element of it as precisely as possible, with sequential numbering. This should assist by (i) reducing the potential for misunderstanding; (ii) reducing the need for further clarification and the delay that this can entail; (iii) averting the chance that an element of the complaint may get overlooked; and (iv) minimising the risk of a later dispute as to the scope of the complaint.
If you are dissatisfied with the response that you receive from the financial business then, provided that the business has issued you with a ‘final response’ (see above), you can make a complaint to the FOS. In some cases, particularly where there have been several rounds of correspondence after the original complaint is made, it may not be clear whether the responses provided by the business, either individually or collectively, constitute a ‘final response’. If the business provides the website address for the FOS within its written response and advises that if you remain dissatisfied you may now refer your complaint to the FOS, that is often a good indicator that it is a ‘final response’. However, if you are in any real doubt, it is usually prudent to ask the business to confirm its position in writing without delay.
Again, it is important that the complaint is made within the time limits set out above. Similarly, if you complain to a financial business and they do not respond within the required timeframe or at all, you are still able to complain to the FOS.
If you choose to make a complaint to the FOS you can utilise the online ‘complaint checker’ to determine if your complaint is eligible. If your complaint is eligible the complaint checker explains how to send your complaint to the FOS and contains links to the complaint forms which can be completed and submitted online or printed off and submitted by post.
What happens when I complain to the Financial Ombudsman Service?
Once a complaint has been made to the FOS it will be allocated to a case handler to investigate. The case handler will consider the complaint, together with any documents provided, and will also ask the financial business for its side of the story.
The case handler may also ask the financial business for documents relating to the complaint or other information which you may not have seen.
Once all relevant information has been obtained and considered, the case handler will make an initial assessment and provide a preliminary decision setting out their view. Both you and the financial business will be able to comment upon that initial assessment. The preliminary decision should also state if the FOS does not consider that the complaint is valid or if there has been no financial loss suffered.
However, if the case handler considers that you have been treated unfairly then the report will say what it considers should be done to resolve the matter. This may require payment of financial compensation or for the business to take another step, such re-opening a bank account that was closed unfairly.
If either party is unhappy with the case handler’s preliminary decision, it can request that the matter be referred to an ombudsman for a final decision.
Alternatively, and where both parties are happy to accept the case handler’s decision, it will be binding on both of you. That will also be the case where the complaint is referred to an ombudsman whose final decision you choose to accept, even if the financial business is unhappy with it.
Where, however, the complaint is referred to an ombudsman (whether at the request of one party (regardless of which) or both of the parties) and you choose not to accept the final decision, you will then be free to pursue the complaint by such other means as you see fit. It is immaterial whether or not the financial business is happy with the final decision.
How much compensation can the Financial Ombudsman Service award?
If the FOS upholds your complaint the financial business will be asked to put matters right. That may include payment of compensation for financial loss and for distress and inconvenience. The award can be in any amount up to the award limit (for which see below) and will be calculated according to what the FOS considers is a fair amount to compensate you financially.
The compensation limit of any financial award depends upon when the complaint was made to the FOS as follows:
- £355,000 for complaints referred to the FOS on or after 1 April 2020 about acts or omissions by firms on or after 1 April 2019
- £350,000 for complaints referred to the FOS between 1 April 2019 and 31 March 2020 about acts or omissions by firms on or after 1 April 2019
- £160,000 for complaints about acts or omissions by firms before 1 April 2019, and which are referred to the FOS after that date
If the FOS cannot calculate how much a financial business should pay to a complainant it may ask the business to undertake the relevant calculation. If the FOS considers that the complainant is entitled to receive a compensation payment in excess of the applicable limit, the FOS will usually recommend an additional amount that the financial business should pay, but the FOS has no ability to order the business to pay that additional amount.
The FOS may also order the financial business to make a payment if it considers that a complainant has suffered emotionally, as well as financially. The FOS can make a financial award for distress, inconvenience and damage to reputation. It can also award interest in addition to any financial award made, even if that takes the total award above the applicable limits.
What alternatives are there to using the Financial Ombudsman Service?
You are not obliged to use the FOS to resolve your complaint and it would seem from the reviews that appear online and on Trust Pilot, that user experience is decidedly mixed.
If the level of financial loss that you or your business have sustained is substantially greater than the limits imposed on the FOS, you may consider that it is not a suitable forum for resolving your complaint. This may also be the case where the complaint is of a technical legal nature and/or raises allegations of professional negligence which require a more careful assessment and/or expert evidence.
Equally, if the time limits within which to pursue a complaint have expired, or if the FOS has (for whatever reason) yielded an unsatisfactory result, you may also wish to consider other forms of dispute resolution.
If the complaint is in essence one of professional negligence, you may well prefer to initiate a civil claim for damages. You can find further information about this process within our related guide: Claim for professional negligence: Your key questions answered
Alternatively, and if your complaint is of a more commercial nature, you may simply wish to commence court proceedings.
Further legal assistance
As professional negligence solicitors we act for clients nationwide, to resolve claims against a wide range of professionals, including claims against a range of financial businesses.
If you would like to arrange an initial consultation with us, free of charge or commitment, please do not hesitate to contact us on 0800 195 4983 or by email at mail@pnclegal.com.
