FOS consultation: Charge to be made to complain to FOS if you use a claims company

dunstonh

The Financial Ombudsman Service (FOS) has proposed changes to its fee structure in a consultation paper.

Under the proposals, FOS intends to charge Claims Management Companies and other professional representatives (e.g. solicitors) up to £250 to lodge a case, which is reduced to £75 if the case outcome is in favour of the consumer. The service will remain free to those who bring their case directly to FOS, as well as families and friends, charities, and voluntary organisations who may be helping them.

FOS are putting forward these proposals to deter firms undertaking claims management activities from making high volumes of poorly researched complaint referrals without any prospect of the claim being held in the complainant's favour.

Over the last two years, 20% of cases referred to the Financial Ombudsman Service have been brought by commercial CMCs and other professional representatives who are taking a significant proportion of the awards otherwise due to their clients. Of these cases, less than a quarter resulted in a different outcome for the complainant than the one already offered by the respondent firm. In addition, despite profiting from it, the current funding model means CMCs and other professional representatives do not contribute to our costs.  

Plus, as has been mentioned here before, CMCs have a lower uphold rates than consumers who use the FOS directly.

" it is evident that, over the past three financial years to date, there has been a consistent trend: the overwhelming majority of cases referred to us by CMCs or other professional representatives have not been upheld or resulted in an outcome in favour of the complainant compared to what the respondent firm had already said at the final response stage of their investigation."

Consultation paper: https://www.financial-ombudsman.org.uk/files/324432/Consultation-charging-claims-management-companies-and-other-professional-representatives.pdf

The consultation paper is quite damning in the way it describes CMCs and how they work. 

born_again

Good idea.
But far better to make them regulated, then they really can hammer them for getting it wrong.

Alpine_Star

As someone who represents complainants to FOS on a voluntary basis I think it's long overdue. The FCA's 'regulation' of CMCs is shockingly inadequate. 

DullGreyGuy

dunstonh said:

Over the last two years, 20% of cases referred to the Financial Ombudsman Service have been brought by commercial CMCs and other professional representatives who are taking a significant proportion of the awards otherwise due to their clients. Of these cases, less than a quarter resulted in a different outcome for the complainant than the one already offered by the respondent firm. 

Personally think this aspect probably needs further explanation. 

The overall percent of cases where a different outcome is achieved is 36% however that rate varies massively by product/complaint nature and most the CMCs I've seen focus on certain topics rather than being willing to take on absolutely anything. For example only 7% of complaints about packaged bank accounts were upheld in 2022/2023 and so if the CMC were achieving a circa 25% success rate then thats vastly higher than the unrepresented complainants. 

Overall not a bad idea but the uneven fees for successful and unsuccessful will just bring arguments of bias and moral risk as the FOS will now be financially motivated to side with the FS firm. 

dunstonh

Alpine_Star said:

As someone who represents complainants to FOS on a voluntary basis I think it's long overdue. The FCA's 'regulation' of CMCs is shockingly inadequate. 

My thoughts were, after reading the paper, was well done FOS but shame on the FCA.   The FCA is always behind the curve on issues.   

Overall not a bad idea but the uneven fees for successful and unsuccessful will just bring arguments of bias and moral risk as the FOS will now be financially motivated to side with the FS firm. 

I gave that in my response to the consultation.  i.e. A financial firm where the complaint has been rejected has done nothing wrong but still gets charged £475.  But the CMC that referred it to the FOS gets charged £175.

Alpine_Star

If FOS are going to charge anyone for filing a complaint on behalf of a complainant they desperately need to improve their communication, which is utterly appalling. 

Rather than communicating in plain, intelligible language they use 'FOS speak' (a strange dialect of management speak) and their encrypted email function is dreadful and not fit for purpose.

I almost always end up making a service complaint with every complaint I file which is routinely rejected but then upheld by the Independent Assessor who makes a financial award to the complainant. 

[Deleted User]

It is long overdue. The ‘heyday’ of CMCs from 2010-2019 mostly covered claims where uphold rates were above 50% and up to 90% for high cost credit, PPI and so on. The paper suggests their scatter gun approach has not changed from the few remaining large CMCs despite clear shifts in the uphold rates and products being complained about. Were the shoe on the other foot and this was firms with a high ‘fail’ rate for managing complaints incorrectly the FCA would push back on them to learn and improve their processes. The only way to get CMCs to learn is to get them to think about what they are referring before they do so. A fee is a blunt but effective way to do this. This will serve to both reduce the number of speculative referrals and (hopefully) increase the quality and effort put in to those cases that CMCs do refer. This should result in better outcomes for consumers who still choose to use a CMC, and FOS resources spent considering cases where their intervention is necessary considering the complaint is raised by a professional representative who should know better than an average consumer what a wrongly rejected complaint looks like. CMCs served their purpose by helping to bring millions more claims to lenders and FOS than there would have been for several major complaint types, in the process widening the experience of millions to the simplicity and effectiveness of the regulated complaints process and the independent Ombudsman service. The majority of good work they did (please don’t hurt me!) was in aggressively marketing this process to the general public far beyond what the FCA did in 2019 and reaching those consumers who otherwise would not have taken action. Now they feel like somewhat of a relic scraping the barrel looking for the next PPI that just doesn’t exist. My only caveat to this general support for the move to charge CMCs a fee is that if the complaint is successful at FOS or not, the fee should be the same to remove any bias. That way the fee for all cases could be lower at say £100 which results in a similar contribution overall but the raising of a referral remains commercial. This would encourage the idea that complaints referred to FOS should aim for a 50%+ uphold and therefore be detailed, strong and genuine. It would also be low enough that lower value, high volume claims, the lifeblood of said CMCs, would still remain commercially viable so they can continue to provide a (contentious to some) service to people who still choose to use them. Otherwise there will be future complaint types CMCs ignore altogether or simply never refer to FOS even when they should as the potential fee for a failed referral is too high and those consumers who want their help may miss out or be underserved as a result. We pay for services everyday for things we can do ourselves for free or much cheaper. CMCs are no different really and consumers should have that choice. To keep it, the fee needs to keep claims commercial for CMCs. 

bill6262

I have copied the above post by [Deleted User] so I can read it. 

It is long overdue. The ‘heyday’ of CMCs from 2010-2019 mostly covered claims where uphold rates were above 50% and up to 90% for high cost credit, PPI and so on. The paper suggests their scatter gun approach has not changed from the few remaining large CMCs despite clear shifts in the uphold rates and products being complained about. Were the shoe on the other foot and this was firms with a high ‘fail’ rate for managing complaints incorrectly the FCA would push back on them to learn and improve their processes.

The only way to get CMCs to learn is to get them to think about what they are referring before they do so. A fee is a blunt but effective way to do this. This will serve to both reduce the number of speculative referrals and (hopefully) increase the quality and effort put in to those cases that CMCs do refer. This should result in better outcomes for consumers who still choose to use a CMC, and FOS resources spent considering cases where their intervention is necessary considering the complaint is raised by a professional representative who should know better than an average consumer what a wrongly rejected complaint looks like.

CMCs served their purpose by helping to bring millions more claims to lenders and FOS than there would have been for several major complaint types, in the process widening the experience of millions to the simplicity and effectiveness of the regulated complaints process and the independent Ombudsman service.


The majority of good work they did (please don’t hurt me!) was in aggressively marketing this process to the general public far beyond what the FCA did in 2019 and reaching those consumers who otherwise would not have taken action. Now they feel like somewhat of a relic scraping the barrel looking for the next PPI that just doesn’t exist. My only caveat to this general support for the move to charge CMCs a fee is that if the complaint is successful at FOS or not, the fee should be the same to remove any bias. That way the fee for all cases could be lower at say £100 which results in a similar contribution overall but the raising of a referral remains commercial.

This would encourage the idea that complaints referred to FOS should aim for a 50%+ uphold and therefore be detailed, strong and genuine. It would also be low enough that lower value, high volume claims, the lifeblood of said CMCs, would still remain commercially viable so they can continue to provide a (contentious to some) service to people who still choose to use them. Otherwise there will be future complaint types CMCs ignore altogether or simply never refer to FOS even when they should as the potential fee for a failed referral is too high and those consumers who want their help may miss out or be underserved as a result. We pay for services everyday for things we can do ourselves for free or much cheaper. CMCs are no different really and consumers should have that choice. To keep it, the fee needs to keep claims commercial for CMCs. 

Nasqueron

CMCs are and always were leeches who charge a fortune for a simple task while lying about what they could achieve (e.g. claiming to find old finance or that they could get better results for you). 

As MSE themselves point out, you should never use a CMC for a complaint about these things, just follow the very simply MSE guides 

[Deleted User]

I couldn’t agree more and for even slightly driven people with a half decent brain it can and should be done directly. Some people are painfully apathetic and others simply want someone else to do everything. CMCs cater to that section of the bell curve of adoption and, whilst they provide a service to consumers that is wanted and used, they are a necessary evil to ensure people from every spectrum of society are catered for. If anything these are the consumers most likely to be duped or just sign stuff. Hells I put my OAP parents through a CMC because they couldn’t organise a 12 piece puzzle and I couldn’t be fussed dealing with them for that long. They found everything (PPI, paid for bank account etc) and got them all the money back as entirely unsuitable for them. Just half an hour on the phone with my crackpot mother is a fee well earned I say. Every spectrum.

[Deleted User]

Nasqueron said:

CMCs are and always were leeches who charge a fortune for a simple task while lying about what they could achieve (e.g. claiming to find old finance or that they could get better results for you). 

As MSE themselves point out, you should never use a CMC for a complaint about these things, just follow the very simply MSE guides 

Also on this, yes the owners of CMCs could be leeches. Their practices, whether when CMR or FCA regulated, were often questionable and they certainly have been under regulated. This cannot be said for many of the people that worked for CMCs who are just people, often trying to do a good job and gaining valuable experience whilst doing so. I have worked with CMCs in the past in addition to law firms and what I mostly saw were young people eager to learn and do a good job. For many the CMC had been the only one willing to take them on in an office role as they aren’t massively picky in their recruitment. This gave those with drive the chance to gain office admin, systems and customer service experience. I just wanted to broaden your thoughts to some of the good they have indirectly done over the years. I am aware of many previous CMC employees who have progressed to good things and more sustainable careers with the experience they got from CMCs being the first stepping stone. I caveat all of this with the fact some treated their staff terribly, with one large CMC I visited more akin to an intense chicken farm than an office environment. It all comes down to the general decency of the employer and employee alike.