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FOS under fire

19 September 2013

FOS faces another round of criticism, sparked by a parliamentary debate  that considered, in light of the reckless and vexatious approach claims management companies have taken to the filing of PPI complaints, whether FOS should be reformed. Nic Dakin (MP for Scunthorpe) initiated the debate, during which he claimed: “The Financial Ombudsman Service places all the risk with businesses, which means that CMCs can act with impunity and without risk.” In its current form, FOS may exercise its discretion to adjudicate on claims and award up to a maximum of £150,000 plus interest – usually without hearing oral evidence.

Concerns with the current system include significant delays and uncertainty with complaints often spanning several years; that there is no duty of disclosure so the true nature of a complaint may be concealed and concerns by respondent firms that they are still required to pay a £550 fee[1] per complaint should they wish to contest a complaint, even if the complaint is vexatious (a concern that has been highlighted by the vast swath of PPI complaints lodged by claims management companies with little or no evidence to back up the complaint).  It should be noted, however, that the number of cases that FOS will investigate without charge to the respondent has been increased from three to twenty five in a bid to address this latter concern.

More fundamentally, there is an inherent imbalance between complainants who need not accept the decision as opposed to respondent firms who find themselves bound by a final decision accepted by the complainant.  There is no right of appeal for the respondent firm other than Judicial Review in very limited circumstances.  This disparity, coupled with the fact that FOS is not bound by precedent and it need not apply the law in its decisions is both worrying and arguably at odds with the respondent’s Article 6 rights to a fair trial.

In light of the above, perhaps it is time for the government to rethink the role of this quasi-judicial body and reform it into a tribunal-based system underpinned by the rule of law.

[1] For the year 2013/14, rising up to £855 in PPI cases.

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