Seeking Advice on Challenging a Financial Ombudsman's Decision - Smile Direct Club

young077

I am writing to seek your advice on how best to challenge a preliminary decision from the Financial Ombudsman Service (FOS) regarding a complaint I made against a finance company. I believe their decision is flawed and I would appreciate your guidance on formulating a strong response.

Background:

My wife underwent dental aligner treatment funded by a loan from Healthcare Finance Limited (HCF). The treatment was provided by SmileDirectClub UK Ltd (SDC). SDC has since ceased trading. My wife experienced significant problems during the treatment, including pain, ulcers, cuts, and concerns about excessive tooth loosening. She attempted to raise these issues with SDC via their app, but received no response. We believe this was due to SDC not having enough competent staff to deal with the number of complaints they were receiving.

I complained to HCF, seeking a refund and cessation of payments, arguing that the treatment was not as advertised and caused harm. The FOS has issued a preliminary decision finding in favour of HCF, stating there is insufficient evidence of a breach of contract or misrepresentation.

Key Points of Contention and Questions for Advice:

The FOS response letter raises several concerns, and I would like your advice on the following:

1. Burden of Proof: The FOS emphasises the lack of a physical contract and the inaccessibility of the SDC app (where the contract was stored) as key reasons for their decision. Given SDC's closure, is it reasonable for the burden of proof to fall solely on me? Should HCF, as the lender, not have ensured contract accessibility? Question: What legal arguments can I use to challenge the FOS's reliance on the missing contract, given HCF's role as the lender?
2. Section 75 CCA Liability: The FOS acknowledges HCF's liability under Section 75 of the Consumer Credit Act 1974 (CCA) for supplier (SDC) breaches, but then dismisses this due to "insufficient evidence." My wife's documented adverse reactions strongly suggest a problem with the treatment. Question: How can I effectively argue that the documented side effects, combined with the lack of access to support, constitute sufficient evidence to warrant further investigation under Section 75, despite the lack of a physical contract?
3. Reasonable Care and Skill (CRA 2015): The FOS mentions the Consumer Rights Act 2015 (CRA) and the implied terms of "reasonable care and skill," but again claims insufficient evidence. My wife was unable to complete any check-ins or gain advice from dentists despite reaching out on numerous occasions via the app as her requests were ignored. We now believe they did not have a sufficient number of competent persons to complete the check-ins. Question: How can I best present the documented side effects and the lack of access to support as evidence of a potential lack of reasonable care and skill, sufficient to challenge the FOS's assertion?
4. Lifetime Smile Guarantee (LSG): The FOS focuses on the LSG and my wife's alleged non-compliance. However, the LSG is a separate agreement. Question: How can I effectively argue that the LSG is a separate issue and should not detract from the core complaint regarding the quality of the initial treatment?
5. Pro-Rata Refund Offer: The FOS considers the pro-rata refund offer reasonable. However, this offer is conditional on returning unused aligners, which is impossible due to the circumstances and the time elapsed since SDC's closure. Question: How can I argue that this conditional offer is not a reasonable resolution, given the impracticality of returning the aligners?
6. Independent Medical Evidence: The FOS notes the lack of independent medical evidence. Question: Am I legally obligated to provide independent medical evidence to prove a breach of contract for services? What alternative forms of evidence can I submit to support my claim, such as records of communication (or lack thereof) with SDC?
7. SDC's Closure: The FOS decision appears to be influenced by SDC's closure. Question: How can I emphasise that SDC's closure does not absolve HCF of its responsibilities under Section 75 of the CCA?

Desired Outcome:

I want to challenge the FOS's preliminary decision and request a full investigation into my complaint. I would be grateful for your advice on how to construct a robust response, addressing the points above and maximising my chances of a successful outcome. Specifically, I need guidance on:

• The strongest legal arguments to employ.
• The most effective way to present my evidence.

Thank you for your time and expertise.

young077

Please see below the FOS response:

Dear Mr ***

Your complaint about Healthcare Finance Limited

We now have all the information we need to look into Mr ***’s complaint. Based on what I’ve seen, I don’t think Healthcare Finance Limited (HCF) needs to take any action. I’ve explained why below.

Please note, although the complaint investigation and final response were completed by Tabeo Broker Ltd (Tabeo), Tabeo act as the administrator for the lending only as shown in the terms and conditions of the agreement.

HCF are the lender, as noted on the agreement. SmileDirectClub UK Ltd (SDC) brokered the agreement. Any potential act or omission relating to a claim made under section 75 of the Consumer Credit Act 1974 (CCA) is the responsibility of HCF only as the lender – therefore, I’ll refer to HCF throughout my view.

The complaint

Mr *** has complained about the way HCF dealt with his request to cease taking any further payments in relation to goods and services he’d paid for using a credit agreement. Mr ***’s wife had a contract for goods and services with SDC, but she was unhappy with the overall service provided. Mr *** mentioned that his wife was worried that the treatment wasn’t going right when she felt like the pain was extreme and she was getting ulcers and cuts in her gums. He said she was concerned that her teeth were actually being loosened too much.

Mr *** said that his wife tried to raise this issue with SDC via the app, but he said she got no response to her requests, and no help or advice like she was promised.

To put things right, it’s understood that Mr *** would like to discontinue making any further repayments, as he doesn't feel that his wife received the treatment that he paid for.

Agreement details

Date of agreement                                                      24 July 2023
Treatment price                                                           £1,665.27
Deposit paid to HCF                                                    £73.73
Loan amount                                                               £1,739
Interest                                                                        £176.23
Monthly payments                                                       £73.66
Number of instalments                                                25
Total amount payable under credit agreement            £1,915.23

Background

On 24 July 2023, Mr *** entered into a finance agreement with HCF to fund the purchase of a dental aligner treatment provided by SDC for his wife. Mr *** told us that shortly after this date his wife received the aligners, and she started her treatment plan. The treatment also came with a Lifetime Smile Guarantee (LSG).

It’s understood that Mr ***’s wife followed the instructions provided, which detailed how long each aligner should be worn for and when they should be replaced, however as mentioned above, he explained that his wife started to have issues with the aligners. He told us that the service was to straighten the top and bottom rows of his wife’s teeth.

In terms of retainers, Mr *** told us that, these weren't ordered because his wife didn’t consider that all of the treatment had been completed. He also told us that his wife attempted multiple times to complete smile check-ins via the app, although for some reason these didn’t go through successfully.

As such, Mr *** has suggested that his wife didn’t receive the full service which he paid for. Therefore, he believes he should not be required to make any further repayments towards the loan agreement.

SDC ceased trading on 10 December 2023, and it’s understood that Mr *** raised a complaint with HCF in or around June 2024.

On 11 July 2024, HCF contacted Mr *** with its final response, offering a pro-rata refund of any aligners his wife was yet to use, provided they were returned unopened and unused, plus an additional £5 cost to cover the cost of the parcel return.

Mr *** explained that his wife did have unused aligners, but these were thrown out. He told us that his wife threw out the aligners before completing the whole treatment, in around February 2024. He mentioned that his wife has mental health issues, which include OCD, and this sometimes means she will throw things out, which she considers to be clutter.

He explained that it was around this period of time that she had a break down and threw everything out that she felt cluttered - but also because the aligners reminded her of something that didn’t turn out right.

He also mentioned that being asked to return aligners six months after SDC had been wound up and the app had stopped working without notice, is not practicable for everyone.

Relevant Considerations

I’ve taken into account the relevant law. So, in this case, section 75 of the Consumer Credit Act 1974 (CCA) makes HCF responsible for a breach of contract or misrepresentation by the supplier under certain conditions. I think the necessary relationships between the parties exists and the claim is within the relevant financial limits.

The Consumer Rights Act 2015 (CRA) is also relevant to this complaint. The CRA implies terms into the contract that traders must perform the service with reasonable care and skill. And that services should be performed within a reasonable amount of time. The CRA implies terms into the contract that goods supplied will be of satisfactory quality. The CRA also sets out what remedies are available to consumers if statutory rights under a goods or services contract are not met.

My investigation

In order to understand if there has been a breach of contract or misrepresentation, I’ve asked Mr *** to provide more information about the treatment plan. There are some specific documents that would help me understand this: the Consent and History Form, the contract and the Lifetime Smile Guarantee (LSG).

Neither Mr *** nor HCF have been able to access the SDC app, which contained much of this information, since it ceased trading. So, in order to complete my investigation, I’ve considered other available evidence such as Mr ***’s testimony, FAQs (taken from the SDC website), and the information HCF have provided.

The Consent and History Form

I’ve been provided with a sample copy of the Consent and History Form by HCF. SDC issued this to each customer, and it details how their aligners system works. It explains the benefits and risks of the aligners and how the retainers should be used once the treatment plan has been completed.

Each customer is required to sign the form under a section entitled “Informed Consent”. This includes the following explanation of the treatment:

“I understand that SmileDirectClub cannot guarantee any specific results or outcomes.”

So, I think Mr ***’s wife would have understood the treatment wasn’t guaranteed, and she was informed of this. Terms that limit statutory liability could be seen as unfair, but I’m conscious of the treatment Mr ***’s wife has received. I have to consider the nature of the product. Aligning teeth is unique to each individual and even if a course of treatment is followed, it wouldn’t be unusual if the results expected could not be guaranteed. The individual’s physiology, medical history and how they use the product could all impact the results.

That’s not to say that terms around reasonable care and skill weren’t implied into the contract. They were. But these implied terms focus on the manner a service has been carried out, as opposed to defining what the result should be.

The contract

The usual starting point when we consider whether there’s been a breach of contract or misrepresentation is the individual contract. However, in this case, neither Mr *** nor his wife are able to provide it, and nor can HCF. All of the parties have said this is because it was held on the SDC app which they no longer have access to since SDC ceased trading. So, I don’t know what it said about what Mr *** or his wife could expect during the treatment or the end result once completed. But presumably it included things such as the provision of the aligners, ongoing support and the LSG (subject to certain conditions being met).

It's not in dispute SDC have provided the aligners required for Mr ***’s wife’s treatment plan. But in the absence of the contract, I can’t say with any certainty if the treatment plan has or has not achieved what it was expected to do. So, it’s difficult for me to say there’s been a breach of contract or a misrepresentation, especially when also taking into account the content of the Consent and History Form as outlined above.

It’s clear Mr ***’s wife received the aligners from SDC, but I wanted to establish exactly what she could expect after completing the treatment plan. However, the details of the treatment are held within the SDC app, which neither Mr *** nor his wife have been able to access since SDC ceased trading. This makes it hard to establish whether there’s been a breach of contract or misrepresentation as we’re unable to review the plan in detail. A contract would set out the rights and obligations of the parties involved. It’s more difficult to evidence a breach of express terms of the contract without one.

Mr *** has also suggested his wife is not happy with the results as she didn’t complete the treatment, and therefore she likely believes that she still needs further treatment. I have no reason to doubt what Mr *** has said happened, but for similar reasons as stated above, in the absence of the contract, it isn’t clear what the eligibility criteria was for additional aligners to be approved.

The Lifetime Smile Guarantee (LSG)

I’ve looked at the detail of the LSG which explains that further clear aligners can be arranged subject to the consumer meeting specific terms and conditions. These were listed on the SDC website and detailed in their FAQs. It’s understood that Mr *** can’t see if his wife complied with the conditions as the details were held in the SDC app. So, I’ve had to rely on any information that could be provided by HCF. The eligibility criteria includes, but is not limited to, registering the aligners, completing regular virtual Smile Check-ins, remaining up to date with payments, buying a set of retainers within four to five weeks before the end of the treatment and replacing the retainers every six months.

It’s also worth noting that this wasn’t a money back guarantee. Following completion of the treatment plan, the FAQ say additional aligners would only be provided free of charge if retainers were purchased every six months from SDC and the other conditions met for the LSG.

I’ve reviewed the FAQ (Jan 2023 to Dec 2023) published by SDC and available on their website prior to them ceasing trading. This explains that the retainers are required to be ordered between four and five weeks before the treatment ends as they are used to ensure the teeth remain in place after all the aligners have been used. If a further period of treatment with aligners is required, this would be arranged after a review by SDC and subject to Mr ***’s wife meeting the conditions of the LSG.

HCF told me they were provided with information by SDC on each customer’s eligibility for the LSG. From the information they received, Mr ***’s wife did not comply with the conditions because she had not attended the smile check-ins, she had not yet completed her treatment and the retainers were not ordered before the end of the treatment.

It’s understood that Mr ***’s wife did not order the retainers, as she hadn’t yet completed the treatment.

Why I’m not asking Healthcare Finance Limited to take any action

Mr ***’s complaint involves a dental procedure about which I don’t have specialist knowledge as to the standard of care and skill which would generally be considered reasonable, or what an acceptable outcome would look like. I’ve not been supplied with independent medical evidence such as a report to suggest the standard of treatment Mr ***’s wife received fell below the level to be expected of a competent provider of dental aligners.

I understand Mr ***’s wife may possibly be unhappy with the results of the treatment plan. But in this complaint, it’s important to note I’m not considering a complaint against SDC. I need to determine whether HCF – a financial service provider – fairly considered his claim under section 75.

In light of the above, I believe they have. While I appreciate Mr *** is put in a difficult position because some of the evidence isn’t available, I can only consider how HCF acted based on what was able to be supplied. Having done so, there’s insufficient evidence to say there’s been a breach of contract or misrepresentation that would make HCF liable for Mr ***’s claim under section 75.

There’s not enough information that shows the outcome his wife should expect following the treatment plan and, in any case, the consent form explains specific results aren’t guaranteed.

There’s insufficient evidence to say the service wasn’t carried out with reasonable care and skill.

Additionally, whilst HCF has said that Mr ***’s wife wasn’t eligible for the LSG I’ve also considered that HCF has nonetheless offered Mr *** a pro-rata refund anyway (in accordance with the terms of the LSG).

As such, I consider the pro-rata refund which HCF has offered, to be a reasonable outcome in the circumstances, given that Mr ***’s request for a refund was made more than 30 days after delivery of the initial aligners (which is a further term under the LSG) – and as a result, a pro-rata refund would have been the maximum that Mr *** would have been able to receive in terms of a refund here, in the circumstances.

I appreciate that the pro-rata refund comes with limitations, and in the circumstances that Mr *** is unable to make use of this refund. As such, this refund is not likely to be particularly helpful for him here. Equally, I’ve thought about what Mr *** has told us about his wife’s particular circumstances, and the reasons behind why she decided to throw the unused aligners away. However, whilst I deeply sympathise with Mr *** and his wife in relation to this very specific and difficult situation – I’ve nonetheless been unable to find that HCF has acted unreasonably here by asking that the aligners be returned, in order for it to process the pro-rata refund here.

Therefore, whilst I understand that Mr *** is likely to feel passionately in the circumstances, I’m satisfied that HCF fairly considered the claim under section 75. On this basis I’m not recommending that HCF needs to do anything further here.

GingerTim

An independent medical report seems to me to be the strongest piece of evidence you could deploy - assuming that the report says what you want it to say.

MattMattMattUK

GingerTim said:

An independent medical report seems to me to be the strongest piece of evidence you could deploy - assuming that the report says what you want it to say.

I totally agree with this, without an independent medical report I cannot see how you actually have a claim.

born_again

To challenge it you go back to FOS & request a Ombudsman to review the case.

DullGreyGuy

This sounds like the letter from an Investigator or Adjudicator who are the level 1 reviewers of complaints and deal with the vast majority of cases. If you or the firm disagree with their decision you will have the option to reject it and the case will then go to an Ombudsman who are the senior people. Once an Ombudsman makes a decision it's purely down to you if to accept or not, the firm cannot reject an ombudsman's decision. If you reject their decision too then you've exhausted the Ombudsman process and your only other step is court against the firm. 

young077 said:

1. Burden of Proof: The FOS emphasises the lack of a physical contract and the inaccessibility of the SDC app (where the contract was stored) as key reasons for their decision. Given SDC's closure, is it reasonable for the burden of proof to fall solely on me? Should HCF, as the lender, not have ensured contract accessibility? Question: What legal arguments can I use to challenge the FOS's reliance on the missing contract, given HCF's role as the lender?
2. Section 75 CCA Liability: The FOS acknowledges HCF's liability under Section 75 of the Consumer Credit Act 1974 (CCA) for supplier (SDC) breaches, but then dismisses this due to "insufficient evidence." My wife's documented adverse reactions strongly suggest a problem with the treatment. Question: How can I effectively argue that the documented side effects, combined with the lack of access to support, constitute sufficient evidence to warrant further investigation under Section 75, despite the lack of a physical contract?
3. Reasonable Care and Skill (CRA 2015): The FOS mentions the Consumer Rights Act 2015 (CRA) and the implied terms of "reasonable care and skill," but again claims insufficient evidence. My wife was unable to complete any check-ins or gain advice from dentists despite reaching out on numerous occasions via the app as her requests were ignored. We now believe they did not have a sufficient number of competent persons to complete the check-ins. Question: How can I best present the documented side effects and the lack of access to support as evidence of a potential lack of reasonable care and skill, sufficient to challenge the FOS's assertion?
4. Lifetime Smile Guarantee (LSG): The FOS focuses on the LSG and my wife's alleged non-compliance. However, the LSG is a separate agreement. Question: How can I effectively argue that the LSG is a separate issue and should not detract from the core complaint regarding the quality of the initial treatment?
5. Pro-Rata Refund Offer: The FOS considers the pro-rata refund offer reasonable. However, this offer is conditional on returning unused aligners, which is impossible due to the circumstances and the time elapsed since SDC's closure. Question: How can I argue that this conditional offer is not a reasonable resolution, given the impracticality of returning the aligners?
6. Independent Medical Evidence: The FOS notes the lack of independent medical evidence. Question: Am I legally obligated to provide independent medical evidence to prove a breach of contract for services? What alternative forms of evidence can I submit to support my claim, such as records of communication (or lack thereof) with SDC?
7. SDC's Closure: The FOS decision appears to be influenced by SDC's closure. Question: How can I emphasise that SDC's closure does not absolve HCF of its responsibilities under Section 75 of the CCA?

1. Yes, you are the claimant that is stating there is a breach of contract, it's therefore up to you to produce the contract to substantiate your claim. 
No a lender doesn't have to keep a copy of the contract, how do you think that would work? I go to Peru and buy something with my credit card at a random stall, how do you think my lender gets a copy of the contract from the stall owner?

2. This is a non-point... S75 has been accepted as applying, the rest of it links to the other points about lack of evidence of the breach

3. I'm like the FOS on this one, have no idea what a "check-in" is supposed to be nor what the promised support was during the process. This is where things like the contract are necessary to see if they promised you free access to a dentist or if this was just some form of customer service call with a typical call centre agent. Its also unclear what evidence you provided that these didnt happen at the fault of SDC

4. You can just tell them that you are no longer worried about the loss of guarantee

5. If you dont pay for something then you dont own it, though again the contract would have covered when title transferred. Whilst it's unusual for a lender to require the salvage to be returned to them they are perfectly entitled to do so. I mean you could attempt to suggest they refund less the lost salvage value but really in this case its probably less about the fact they can resell them for 1/2 price and more about substantiating that they weren't ever used

6. You're never obliged to provide any evidence to back up your witness statement however the probability of winning a case without any evidence is substantially lower. The FOS do not employ dentistry experts, they have no idea how common ulcers are or if you thinking it was making the teeth "too loose" actually is true or is you not knowing how loose teeth become whilst being repositioned by the retainers. This is were the independent expert comes in who can see for themselves the issues and then state if its normal behaviour or its a problem.

7. I dont understand why you think so? 

young077

Is there even much point me arguing this any further?

Am I best just accepting I owe the outstanding balance for a treatment that was never completed? Part of the service with SDC was the regular check ins with dentists, which never happened while they were trading and obviously not after they ceased trading.

SDC basically deleted everything on the app without warning so there is a lack of evidence either way caused by this.

My wife's teeth is no better than before she started the treatment but would this even be something worth proving? As no doubt asking a dentist to provide a report on this would cost me money and if at the end of it I still end up owing upwards of £1500 it isn't going to help and will just add to the complete waste of money this whole experience has been. 

visidigi

young077 said:

Is there even much point me arguing this any further?

Am I best just accepting I owe the outstanding balance for a treatment that was never completed? Part of the service with SDC was the regular check ins with dentists, which never happened while they were trading and obviously not after they ceased trading.

SDC basically deleted everything on the app without warning so there is a lack of evidence either way caused by this.

My wife's teeth is no better than before she started the treatment but would this even be something worth proving? As no doubt asking a dentist to provide a report on this would cost me money and if at the end of it I still end up owing upwards of £1500 it isn't going to help and will just add to the complete waste of money this whole experience has been. 

If I'm honest..rights aside, no I don't think so.

There was no guaranteed results, there was a requirement to complete the process in the hope of achieving the best outcome. By stopping using it (and not doing retainers) puts you on a difficult footing, as does throwing out the proof you aren't just after a refund because SDC went bust (as in you can't return the proof you didn't actually use it all).

Like I say you could fight it by right, but I expect you would be throwing more good money after bad.

young077

visidigi said:

young077 said:

Is there even much point me arguing this any further?

Am I best just accepting I owe the outstanding balance for a treatment that was never completed? Part of the service with SDC was the regular check ins with dentists, which never happened while they were trading and obviously not after they ceased trading.

SDC basically deleted everything on the app without warning so there is a lack of evidence either way caused by this.

My wife's teeth is no better than before she started the treatment but would this even be something worth proving? As no doubt asking a dentist to provide a report on this would cost me money and if at the end of it I still end up owing upwards of £1500 it isn't going to help and will just add to the complete waste of money this whole experience has been. 

If I'm honest..rights aside, no I don't think so.

There was no guaranteed results, there was a requirement to complete the process in the hope of achieving the best outcome. By stopping using it (and not doing retainers) puts you on a difficult footing, as does throwing out the proof you aren't just after a refund because SDC went bust (as in you can't return the proof you didn't actually use it all).

Like I say you could fight it by right, but I expect you would be throwing more good money after bad.

While I'm not exactly thrilled about what you have said, I appreciate your reply and honesty.

This is really difficult situation as there was no communication from anyone to say customers should see the treatment through to the end and then get a retainer from x,y,z in the absence of SDC. There is now that information available but as far as I am aware it wasn't until over 6 months later, due to the sheer amount of customer queries Tabeo were receiving they weren't even taking calls from SDC customers. However as far as I'm concerned, the information was available far too late.

I understand legally I don't have a leg to stand but it's disappointing.

Thanks for all the replies.  

DullGreyGuy

young077 said:

Is there even much point me arguing this any further?

Am I best just accepting I owe the outstanding balance for a treatment that was never completed? Part of the service with SDC was the regular check ins with dentists, which never happened while they were trading and obviously not after they ceased trading.

SDC basically deleted everything on the app without warning so there is a lack of evidence either way caused by this.

My wife's teeth is no better than before she started the treatment but would this even be something worth proving? As no doubt asking a dentist to provide a report on this would cost me money and if at the end of it I still end up owing upwards of £1500 it isn't going to help and will just add to the complete waste of money this whole experience has been. 

Ultimately it has to be your decision, based on what you say here you dont have a great case but there is always an element of a roll of the dice with these things. 

There was no guarantee of what the result would be and on the basis you abandoned the process part the way through is going to be a significant part of that reason but you failed to get any expert opinion on the matter at the time to know what the cause of the problems were.

I mean you could try and just focus on the lost value of the future check-ins given you cannot evidence the missed prior ones but you'd need to substantiate what your contractual rights were to. Secondly it may be countered by the fact you'd already abandoned the treatment and disposed of the equipment and so the checkins had no value 


Unfortunately when companies go busy their suppliers, like the data centre hosting their app, quickly pull the plug rather than allow them run up further debts when they are going to get 1-2p per £1 owed if they're lucky