The Rise and Rise of the Financial Ombudsman Service

Clients and customers have always complained about businesses; it was ever thus. In the old days businesses investigated the complaint themselves and if the clients were unhappy with the outcome, they could always go to Court. Things change however.

Twenty years ago or so, the introduction of Ombudsmen were seen (if at all), as a niche sideline with a few small independent offices headed by individuals responsible for responding to complaints. They were not Judges, nor civil servants, nor elected representatives. Things have moved on fast since then. The Ombudsman system has grown. There are now Ombudsmen for Parliament, local government, prisons, probation, the police and defence forces.

For financial businesses and professional service providers however the daddy of all of the Ombudsman services is the Financial Ombudsman Service (the “FOS”). It now employs well over 1,000 staff and on any analysis, the word “Ombudsman” cannot be associated with smallness. The FOS is the largest scheme of its type in the world.

The FOS deals with more and more complaints from businesses and is criticised for being consumer or complainant friendly, possibly with some justification.

For example, the legal principals for rules on limitation and breach of duty have evolved over hundreds of years but are dealt with very differently by the FOS.

Nor should one think that the stakes are not high. The maximum award the FOS can make is £100,000; although some argue it should be higher and this figure will inevitably increase.

So what should businesses do when faced with a claim brought by the FOS on behalf of a client? It may sound boring (and even a little self-serving) but your first action is to take legal advice. The FOS is in the business of delivering justice, and although they perform their function in a different way to the Courts, they still follow the basic legal principles. And, if you do not like the result of the Ombudsman, you can take them to Court, through the Judicial Review procedure.

In other words, whilst a complaint to the FOS is not quite the same as being sued there are distinct similarities. However, it’s doubtful that the phrase “see you in the financial Ombudsman Service” will really catch on to the same degree as “see you in Court”.
Contact David Turner on 01392 411221 or email david.turner@ foot-ansteys.co.uk

Published 14/11/2007. The author of this article is David Turner