Written evidence submitted by Consumer
Focus, Age UK, Citizens Advice, and Which?
We are aware members of the Committee have asked
questions in evidence sessions about requiring consumer contributions
prior to the Financial Ombudsman Service (FOS) taking on a case
in an effort to deter speculative complaints. This issue was not
raised in the session held with consumer groups so we wanted to
put our views on the record.
We are very supportive of the current arrangements
which allow free access for all consumers to the FOS. We strongly
believe any charge for access is likely to deter many consumers
with legitimate complaints from seeking redress as they would
have to weigh up the potential risk of increasing any financial
loss. This view was supported by Lord Hunt of Wirral when he conducted
his independent review: "I think it far more probable that
many complainants—including the most vulnerable—would
be deterred from advancing even cases that have obvious merit,
particularly in claims of comparatively low value. From the perspective
of accessibility, this cannot be the right solution".[66]
Universal free access is one of the criteria
for membership of the British and Irish Ombudsman Association.[67]
It would be deeply damaging to the wider ombudsman movement, which
has benefited consumers, if the country's biggest ombudsman scheme
failed to live up to the accepted standard.
Furthermore, by increasing the hurdles consumers
face in seeking redress there is less incentive for the industry
both to get things right the first time, and to resolve complaints
quickly, effectively and fairly. The financial services industry
has an extremely poor track record of adequately resolving customer
complaints. The FSA's recent review of complaints handling in
banks[68]
found evidence of poor complaints handling standards within most
of the banks they assessed. Meanwhile the FOS has seen uphold
rates increase in favour of consumers across their work and is
currently upholding in favour of the consumer in over half of
all the disputes they resolve. Consequently, it is vital consumers
have the Ombudsman as a free fallback option when the banks fail
them. They should not have to pay to gain access for redress resulting
from poor treatment.
We also wish to counter the claim that speculative
complaints are an extensive problem causing excessive costs and
delays. The FOS already makes stringent efforts to limit its costs
and to ensure cases that it charges are neither speculative nor
vexatious. In 2009-10, only 702 cases out of the 166,232 settled
during the year (0.4%) were categorised as frivolous and vexatious
and firms are not charged a case fee in these cases. Furthermore,
fewer than one in six initial enquiries become chargeable cases
and the FOS makes pro-active efforts to settle cases very early
on thereby avoiding a fee. Each firm receives 3 "free cases"
under its levy and that means only 1% of all businesses covered
pay any case fees.[69]
It has been suggested that financial firms are
concerned by the significant number of cases and delays generated
by claims management companies (CMCs) on payment protection insurance
(PPI). We would point out that the uphold rate for PPI cases is
higher than the average at 89%.[70]
Therefore, there is no evidence to suggest the cases CMCs generate
are not legitimate.
We would be interested to see what evidence
the industry has presented supporting their case that speculative
complaints are a problem, and on the cost burdens they believe
these impose. The highly unsatisfactory delays involved in complaining
to FOS we believe are the result of banks failing to settle cases
earlier when they know they will lose. The solution is to get
banks to settle cases earlier when they know they will lose, rather
than making the FOS less accessible to consumers.
We very much hope the Committee takes on board
our views and rejects the idea of introducing a charge for access
to the FOS.
21 December 2010
66 http://www.thehuntreview.org.uk/updates/FOS_Report.pdf Back
67
http://www.bioa.org.uk/criteria.php Back
68
http://www.fsa.gov.uk/pages/Library/Other_publications/complaint_handling/index.shtml Back
69
http://www.financial-ombudsman.org.uk/publications/technical_notes/QG1.pdf Back
70
http://www.financial-ombudsman.org.uk/publications/ar10/ar10.pdf Back
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