Dealing with problem financial organisations

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The Financial Ombudsman Service may not be familiar to many, but it could be a lifesaver for businesses. Adam Bernstein has the details

Hacked off with the bank over charges? Angered by an insurer’s refusal to pay a claim? What about a business credit card that’s had its terms changed?

These are all matters for a well-established but not necessarily that well-known official body, the Financial Ombudsman Service (FOS). With new powers granted from 1 April 2019, the FOS could well be a firm’s route to fighting big financial institutions – at no cost.

The Financial Ombudsman Service

The FOS is a free service, set up by Parliament to deal with complaints against any financial organisation. Costs are borne by the financial services sector out of levies collected by the Financial Conduct Authority and case fees.


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[/wlm_nonmember] [wlm_ismember]It’s these case fees that make the FOS interesting because depending on the claim, an institution may settle a case that it might not win rather than dig its heels in unnecessarily. This is because as it presently stands, each institution is permitted 25 investigations a year without charge. Beyond that they pay £550 per case, added to which will be its own internal costs and time; the fee is chargeable whether the institution wins or loses.

Primarily aimed at helping the individual, the FOS has, for some time, been able to help certain businesses and charities. However, from 1 April 2019 more organisations came under its protection. Now assistance can be given to firms with £6.5m turnover (previously £1m), that have less than 50 staff (was less than 10), and which have a balance sheet of less than £5m – previously less than €2m (yes, euros).

As the FOS points out on its website, it can resolve complaints about most financial products and services including debt collection and repayment, mortgages, pensions and investments, bank accounts, payments, cards, loans and credit. There are severe regulatory consequences for any firm that threatens to penalise a complainant for exercising their legal right to take a case to the FOS.

The process

Before the FOS can step in a complainant has to give the offending institution an opportunity to investigate and where appropriate, fix the problem. This means making contact, outlining in simple terms what the issue is and what is required to make amends.

The institution then has eight weeks to respond with an offer to fix, or alternatively, a ‘deadlock’ letter where it denies the claim. From that point on the FOS can intervene.

However, and this is important, there are strict time limits placed on the FOS’s investigations. It cannot examine matters that happened more than six years prior to the claim or more than three years from when the matter first arose (or the matter should have been noticed). Further, the FOS cannot investigate matters where the complaint is made more than six months after the deadlock letter has been issued.

probate for example. It can also investigate any firm in the UK (but not one based in the Isle of Man or Channel Islands), even if the complainant lives overseas. It’s just as noteworthy that some overseas firms – PayPal is an example – have asked to be covered by the FOS.

The online process guides a complainant when making contact, but it’s expected that information supplied includes an overview of the problem, details of the institution at fault, supporting evidence, and what is needed to deal with the matter.

The FOS reckons that 90% of complaints are dealt with by its first level investigators. However, hearings can be held if the investigator cannot decide the case and more information is needed.

Alternatively, either side can request a hearing, explaining the points that they would like to make when making the request. During the hearing the ombudsman summarises the case, lets each side make its case, asks questions and allows each side to ask questions of the other. Legal representation is not encouraged.

Where the decision goes against the complainant, it’s possible to appeal further within the FOS. Beyond that, if the decision is held in favour of the institution, it’s still possible move the matter to the courts. But if the decision is accepted there is no further recourse. Either way, the decision is binding on the institution.

One thing to note: the FOS is designed to be simple to use and informal. There is no need for a complainant to hire representation. That said, if the matter is complex or large sums are involved, it may be worthwhile their seeking legal advice to see if a court, rather than the FOS, would be better. Further, the FOS cannot take on the case if the matter has already been through the courts.


If the decision goes in the complainant’s favour the FOS can require the institution to either apologise, pay an award to cover loss, refund fees and charges, or pay compensation.

But just as from 1 April the FOS gained new powers to help more businesses, so the limits on compensation rose. Complaints made before 1 April were limited to £150,000. But complaints relating to periods before 1 April but referred to the FOS after 1 April are limited to £160,000. However, complaints relating to periods after 1 April have an upper limit of £350,000. Beyond those limits the FOS can only recommend that the institutions pay more.

On top of those limits – which only relate to compensation – are costs and interest.

Enforcing a ruling

Where the FOS has made a costs or compensation award, the institution will be told what and who to pay. The decision is legally enforceable by the courts.

But what if the institution refuses to comply? In this instance it’ll be necessary to begin enforcement proceedings. Location of courts and enforcement offices can be found online in England and Wales at, in Scotland at, and in Northern Ireland, at

The case must be brought in the name of the person or business on the final decision document from the FOS – exactly as it was written. The FOS says that non-compliance is rare and so offers guidance on its website under the heading of ‘enforcing an ombudsman’s decision in court’ that complainants can pass onto court officials as they may not be aware of the process.

Where the institution cannot pay – it’s gone out of business or is about to – the claim can be sent to the Financial Services Compensation Scheme (FSCS) as a last option. Online at, the FSCS takes information from the FOS and progresses the claim under its separate rules.

In summary

While fighting a large financial institution puts a complainant in a David and Goliath situation, the FOS can level the playing field. There are time limits and a process to follow. But anyone or any business with a decent case should actively pursue their rights.

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