Sippdeal shocker (& link to template complaint letter)

SnowMan

To recap I complained to the Financial Ombudsman Service because Youinvest had quadrupled my platform charges within 8 months of me switching to them (despite me already being on an explicity charged structure that complied with the Retail Distribution Review) and Youinvest refused to waive exit charges that amounted to over 3 times the annual platform charge to leave. The initial adjudicator at the FOS had assessed my complaint very superficially (in my view) and recommended the complaint not be upheld.

My main argument supplied to the FOS was as follows

This is based on
- Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR)
- OFT Unfair contracts terms guidance OFT311 (in particular pages 52 to 58)
- FSA finalised guidance – Improving standards in consumer contracts - January 2012


I do not agree with the quadrupling of charges because it involves a materially detrimental price increase, and the quadrupling of charges I regard as excessive. The terms and conditions allow for charges to be increased in line with national average earnings as measured by the Average Weekly Earnings Index (see term 9.7) which is potentially fair, (see UTCCR schedule 2, 2 (d)) although even that term is ambiguously worded. However the quadrupling of charges is obviously much greater than that.

A significant imbalance to my detriment is caused by the imposition of the exit charges when the business is quadrupling the platform charge, which I have clearly not agreed to when I entered into the contract less than a year ago. This is due to the fact I am facing a significant increase in cost whatever course of action I take (if I stay I face a quadrupling of charges, if I leave I face exit fees of around three times my annual charge).

Youinvest say in their letter of 24th December that when I transferred to them I held non-clean funds which they converted into clean funds saving me £297. That is completely misleading as to the contract entered into.

In an exchange of emails ending 30th January 2013 (copy enclosed) before I instigated the transfer, I clarified with Youinvest that my sole reason to transfer was to move into clean classes, for example I say in my email of 29th January ‘given that my ability to move to clean classes was my sole reason for transferring’. As the emails make clear, had the clean share classes not have been available then I would not have transferred and entered into the contract with Youinvest. The re-registration then conversion was just practically how Youinvest would achieve this. That exchange of emails makes it very clear to both sides that both sides were entering into a contract for clean share classes explicitly charged on an RDR compliant basis at a £50 per annum platform charge.

As an aside Youinvest are factually wrong to imply that the HSBC clean class trackers have been 0.15% pa cheaper than holding their retail equivalent on their platform (albeit as indicated I would never have remotely considered holding non-clean funds with Youinvest, incurring dealing fees and a platform fee, when the same non-clean funds I transferred from Fidelity and HSBC had no dealing fees and no platform charges). This is because there is an additional 0.05% registration charge for the clean classes that doesn’t apply to the non-clean classes that is included in the OCF (but not the AMC) so the clean classes are 0.1% pa cheaper not 0.15% pa cheaper.



YouInvest argue that they have given ‘reasons’ stated in the contract for the price increase as their justification.

However the OFT guidance OFT311 (in particular pages 52 to 58) is crystal clear that price changes (as opposed to other changes) are fundamental changes to the contract, and this isn’t a potential loophole for Youinvest to use, for example in the footnote on page 58, ‘note the absence of a 'valid reasons' route to fairness. The OFT does not consider that use of 'valid reasons' normally justifies price increases, essentially on grounds stated in paragraph 12.3 that is, lack of verifiability.

This seems to be based on Schedule 2 of UTCCR which includes within the indicative and non-exhaustive list of terms which may be regarded as unfair (and it is referenced in the FCA guidance 3.4 also)

1 (l) providing for the price of goods to be determined at the time of delivery or allowing a seller of goods or supplier of services to increase their price without in both cases giving the consumer the corresponding right to cancel the contract if the final price is too high in relation to the price agreed when the contract was concluded;

As I am invested in clean funds that are explicitly charged (and that was the basis of my entering into the initial contract with Youinvest – see earlier) there seems to be no regulatory reason for my charges to increase in any case, let alone quadruple. So there is a question mark over whether any reason has been given at all that applies to me. The Youinvest email of 28th November seems to just mention regulatory reasons and the Youinvest letter of 24th December is also very unclear as to what reason set out in their terms and conditions that they list, that they are loosely and arbitrarily assigning as the reason for the quadrupling of charges. I am completely unable to verify the quadrupling of charges; that is the demonstration required (if demonstration is required) of the absence of a valid reason route to fairness due to lack of verifiability.


The FSA guidance clearly clarifies that free to dissolve the contract without penalty or suffering financial loss includes the waiving of all exit charges (see section 3.15, 3.16 & 3.17 of the FSA Finalised Guidance).


Aside from the argument above this is a clear case of Youinvest not treating its customers fairly through trying to impose an exit charge of, in this case, 3 times the annual charge, following a significant (in my case a quadrupling) of charges. How can any investor make an informed decision as to which platform to invest, when a platform can arbitrarily and un-verifiably tear up the contract entered into, and quadruple charges within a year, and then charge 3 years worth of charges to exit? When I was deciding in January whether to transfer to Allied Trust Savings (who at the time offered clean share classes at an explicit platform charge of £48pa) or Youinvest, I would have needed a crystal ball to make an informed choice. Note I accept that Youinvest can increase charges, but what they must do is provide a free exit route if they do. Youinvest are at time of writing waiving exit fees of up to £500 for investors moving to them. It is grossly unfair that exit fees are being imposed on investors forced to leave, due to unfair treatment and quadrupled charges, at the same time that Youinvest are paying exit fees for customers transferring to them.

In summary Youinvest is under a crystal clear obligation to waive exit charges (including re-registration charges). Their failure to do so, and the consequential losses I have suffered as a result, form the basis of my claim.

The (new) adjudicator has not upheld my complaint.

Unbelievable there is no mention in her written response whatsoever of 1(l) only 1 (j).

The written opinion says that the increase was for a valid reason so its OK, but doesn't state what that reason is and there is no consideration of my argument that RDR didn't require an increase in charges.

I've spoken to her but she is refusing to revise her opinion to include consideration of 1 (l) or why the reason is valid despite my argument above.

Complete disgrace. Not upholding the complaint is one thing but refusing to consider my points is farcical and brings the FOS into disrepute in my view.

masonic

SnowMan wrote: »

The (new) adjudicator has not upheld my complaint.

Unbelievable there is no mention in her written response whatsoever of 1(l) only 1 (j).

The written opinion says that the increase was for a valid reason so its OK, but doesn't state what that reason is and there is no consideration of my argument that RDR didn't require an increase in charges.

I've spoken to her but she is refusing to revise her opinion to include consideration of 1 (l) or why the reason is valid despite my argument above.

Complete disgrace. Not upholding the complaint is one thing but refusing to consider my points is farcical and brings the FOS into disrepute in my view.

That's a really bad decision and paves the way for financial companies to launch products with low charges and high exit fees, specify a few vague reasons for changing their charges in the contract and then jack up the charges using one of those reasons, leaving the customer forced to grin and bear it or pay through the nose to end the contract.

It's a real shame the the OFT guidance is being ignored by the FOS. Their position on this issue in the past has been different. I wonder if they have been lobbied to do so by some of the platforms currently haemorrhaging customers.

SnowMan

Obviously I can now refer the matter to an Ombudsman, but I have lost all faith in the vaguest competence of the FOS. Looks like it might be the courts for a proper assessment.

I've raised a complaint against the FOS adjudicator also for refusing to treat me fairly by even considering my points.

SnowMan

What the decision also means is that Youinvest should be avoided by anyone considering an investment platform.

I guess those with shares and ETFs at Youinvest could be next to be hit by a large increase in charges and large exit charges to leave (on the vague reason the increase in charges is to avoid cross subsidy with those holding funds).

Short of taking a claim through the courts there will be nothing those holding shares and ETFs can do to stop that happening.

masonic

I'd tend to agree that Youinvest has shown itself to be the worst platform for refusing to back down after unfairly trying to impose these exit fees.

Do you also intend to follow up with the FCA regarding the adjudicator decision? If the FOS isn't capable of adjudicating sensibly over these matters, it adds yet more weight to the growing pressure there must be for the FCA to take action over the application of these charges.

naedanger

masonic wrote: »

That's a really bad decision and paves the way for financial companies to launch products with low charges and high exit fees, specify a few vague reasons for changing their charges in the contract and then jack up the charges using one of those reasons, leaving the customer forced to grin and bear it or pay through the nose to end the contract.

It's a real shame the the OFT guidance is being ignored by the FOS. Their position on this issue in the past has been different. I wonder if they have been lobbied to do so by some of the platforms currently haemorrhaging customers.

Completely agree. It is not just a shame it is a disgrace.

naedanger

masonic wrote: »

Do you also intend to follow up with the FCA regarding the adjudicator decision?

I have had a bit of correspondence with the FCA and I don't know whether they are any better. The OFT seems to be the only regulatory body that seems to "get" the UTCCR and unfortunately we have the FCA instead for contracts relating to financial services.

The FCA should have nipped this matter it in the bud. Instead of the proactive regulation promised we have inactive regulators.

SnowMan

Just noticed that most of the FOS wording in my FOS response has been copied word for word from that used for Julia Marsh in this post.

That was a case where the Ombudsman refused to consider 1 (l) despite it being pointed out to him.

Clearly they are just sending the same flawed garbage to everyone and deliberately ignoring parts of the UTCCR. There is no independent assessment going on and the adjudicators seem to have no understanding of the UTCCR at all and FOS policy is to ignore 1 (l) of the UTCCR.

It explains why the adjudicator had no understanding of the UTCCR at all because she I'm guessing just pasted in the wording from what seemed a vaguely similar case without understanding what it meant it seems :rotfl:. She started making up silly things like provided a term didn't infringe 1 (j) it was not necessary to check whether it infringed 1 (l). When I pointed out this was wrong, she changed her mind and said that if a term infringed 1 (l) the UCTRR did not require a free exit. Then she changed her mind again and said that the re-registration charge was not an exit charge. She was completely clueless.

Wouldn't be surprised if my case is passed to the same clueless former Quality Assurance Manager Ombudsman that Julia Marsh's case was passed to given the apparent lack of independence of decision making.

naedanger

SnowMan wrote: »

Wouldn't be surprised if my case is passed to the same incompetent Ombudsman that Julia Marsh's case was passed to.

The danger is that that Ombudsman, having dealt with similar cases (e.g. Julia Marsh's case), is seen as experienced (or even worse "an expert") in UTCCR and exit charges. I obviously sincerely hope this is not the case.

It really is annoying that such unsound and badly reasoned decisions continue to be made.

The only positive side is that if the Ombudsman does see sense then the case (with personal details removed) will be available for others to see and quote.

SnowMan

masonic wrote: »

Do you also intend to follow up with the FCA regarding the adjudicator decision?

Thanks masonic. I have sent this email to the FCA today.

Dear Sir or Madam

Re: Your ref number: **********


I would like to update you on this issue. I assume you have access to the previous correspondence and phone notes on this so won’t repeat these. However to recap the basic position as it affects me is:

Youinvest quadrupled my platform charges within 8 months of me switching to them (despite me already being on an explicity charged structure that complied with the Retail Distribution Review. Youinvest refused to waive exit charges that amounted to over 3 times the annual platform charge to leave.

I have taken my individual case to the Financial Ombudsman Service (FOS).

However despite me mentioning that it is 1 (l) of the UTCCR has been infringed the adjudicator is refusing to look at whether Youinvest have infringed 1 (l) only 1 (j). They have not upheld the complaint and have made no mention whatsoever of 1 (l) in their written opinion. I have asked that 1 (l) be considered but the adjudicator has refused to include any mention whatsoever in her opinion.

Effectively this means that investment platforms can increase charges (e.g. quadrupling charges) without allowing customers a free exit (exit fee is 3 years worth of charges in my case) because the FOS are not looking to judge whether terms are unfair in relation to 1 (l). While the FSA (as was) guidance on unfair terms does briefly mention 1 (l) should be complied with, the guidance is concentrated around 1 (j) and in practice the FOS ignores the mentions to 1 (l) even when it is repeatedly brought up by complainants, as my experience demonstrates.

This leaves investors the only option to take matters forward to take action through the small claims track of the county court. I am considering doing this, as waiting a further year for an Ombudsman to look at the original adjudicator’s decision is possibly not worth it. There has been another worrying FOS decision where the complainant mentioned 1 (l) and asked for it to be looked at. In that case the Ombudsman refused to consider or include mention of 1 (l) anywhere at all in their final decision. Interestingly the text from my reply is copied verbatim from that decision and it does seem to be FOS unofficial policy is to allow firms to breach the unfair terms, in particular never to consider or mention 1 (l). In essence their definition of fairness is harsher for consumers than that prescribed by law.

The FOS approach in practice paves the way for financial companies to launch products with low charges and high exit fees, specify a few vague reasons for changing their charges in the contract and then jack up the charges using one of those reasons, leaving the customer forced to grin and bear it or pay through the nose to end the contract.

Could the FCA please confirm whether they agree with the OFT311 guidance in relation to its application to potentially unfair terms for financial companies, in particular the section on group 12 terms (to use their numbering, as l is the 12th letter of the alphabet). In particular do the FCA agree that the OFT are correct in saying in relation to group 12 terms ‘Note the absence of a 'valid reasons' route to fairness. The OFT does not consider that use of 'valid reasons' normally justifies price increases, essentially on grounds stated in paragraph 12.3 that is, lack of verifiability’. Or do the FCA consider a weaker test should apply?

I do get the feel that the FCA (although sadly not the FOS, which may be down to lack of understanding on their part) are concerned about this issue. However if you are unable to give this assurance, I intend to take the matter up with my MP as it seems to be that non-enforcement of the UTCCR by the FCA and FOS, as intended by Parliament, is undemocratic, and significant future customer detriment is likely as a result, and I would like the public to be protected in future. This sort of thing does not happen in other industries, for example OFGEM have intervened to stop firms flouting 1 (l) in the energy industry.

Thank you for your help

Yours faithfully

SnowMan


cc FOS adjudicator