Complaints to FOS: Access concerns
Charging law firms and claims management companies (CMCs) fees of £250 per case to bring complaints to the Financial Ombudsman Service (FOS) could make volume complaints “unmanageable”, the Law Society has warned.
While it was not opposed in principle to the introduction of the new fee by FOS, the society said charging as much as £250 was “disproportionate” and could make litigation a “more affordable” option.
Despite strong opposition to the idea in a previous consultation from both lawyers and CMCs, FOS proposed charging them £250 per case in a consultation launched in May this year.
However, £175 would be refunded if the complaint was successful, while the first three complaints each year would be free.
At the moment, FOS only charges a fee of £650 per case to respondents, irrespective of whether the complaints is upheld.
FOS said around a fifth of the 400,000 cases referred to it in the past two years were brought by lawyers and CMCs, but only 22% of them were upheld, compared to an average of 32% for the service as a whole.
The Law Society, in its response, said the majority of professionals representing complainants did not bring more than three cases per year to the service – the maximum proposed amount before the new fees apply.
However, firms which brought more than that often brought “a large number of cases, some in the thousands”.
The society went on: “For those firms, the fee makes their practice unmanageable unless the consumer pays the increased costs, which could have an impact on those with less ability to pay.
“Furthermore, the introduction of a fee this high is prohibitive for Law Society members who may want to bring a new business model where they do not take any portion of damages awarded.
“Instead, they will have to revert to the more typical model which will in turn lead to reduced damages for successful claimants.”
The society said the use of ombudsmen should be “an attractive option” for claimants and aligned with the principle that litigation was a last resort.
“The implementation of a £250 fee challenges that principle, as it is disproportionate when compared with what the court fees would be for the same cases. For some, it may in fact mean that litigating is more affordable than using the ombudsman.”
The society acknowledged that the £175 refund “could go some way towards mitigating those concerns”.
The response said encouraging claimants to bring cases without a professional representative was “not a problem” as long as the service was “sufficiently accessible”.
Setting up a helpline for those seeking to access the service without professional representatives would help, it suggested.
The Personal Investment Management & Financial Advice Association argued last month that fees for law firms and CMCs needed to be as high as £450 per case to act a “real disincentive” to frivolous complaints.
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