Attentive readers of this blog will have noticed several passing references to the inadequacies of the Financial Ombudsman Service. I have spared you the full account of my previous dealings with them, resulting in a 15 page consolidated complaint and an apology (albeit without acceptance of all the criticisms). Here is the summary from that paper, written in 2010–11:
(a) Whether or not the decisions themselves were wrong, they were arrived at by wilful or ignorant disregard for important principles of consumer law as well as of the FOS’s own rules as set out in the FSA Handbook (DISP 3), and so can be the subject of a service level complaint. A response that refuses to discuss such breaches on the grounds that the complaint is mere dissatisfaction with the decisions will not advance the debate.
(b) The FOS’s procedures are set up, possibly in breach of its own rules, so that junior staff, often with unimpressive intellectual skills, reach bad decisions, which are then referred to ombudsmen where there is a strong bias to uphold the earlier decision however unfair.
(c) They are conducted in deliberate breach of at least one important principle of natural justice. In order to obtain the evidence submitted by the other sides I had to make subject access requests under the Data Protection Act 1998.
(d) FOS staff unlawfully withheld or redacted embarrassing documents which were properly requested under the DPA, even after their conduct had been challenged. Sensitive personal information was unnecessarily obtained and inadequately protected.
(e) Staff deliberately turn a blind eye to laws, regulations or contractual terms which have clearly been broken by banks. This contributes to a perception of bias against the consumer. The banks failed to provide constructive responses to my initial complaints, and the FOS allowed them to provide wholly inadequate responses to such questions as were put.
(f) The FOS’s complaints handling procedures, which I attempted to invoke after things were obviously going wrong six months into the earlier case, merely exacerbated the tensions. The service review team was abolished during the correspondence without my being told, and at various stages I was not aware of who was dealing (or failing to deal) with my complaint.
(g) The FOS’s response to intelligent and thoroughly documented complaints often involves repeating the original statement even when it is obviously wrong. Assuming staff simply had not understood, I patiently repeated the points. But I learned that generally the FOS has a culture (although usually concealed by a veneer of politeness) of disregard for rational argument, and a determination to stick to an initial view to reject a complaint no matter what evidence or argument is subsequently presented.
(h) Although the FOS conceded that something may have gone wrong, namely the outrageous delays arising in one case, even here however I am not convinced that the FOS really “gets it”. It constantly disregarded my attempts to speed things up, even when I disclosed related pending actions which were facing limitation bars. These complaints were both at the simplest end of the spectrum, both as regards the type of breach and the minimal amount of relevant documentation; they should not have taken more than a few weeks to resolve rather than the 13 months in one case (9 months in the other) between the initial complaint to the FOS and the final decision.
(i) The FOS’s statutory objective is to resolve complaints “fairly, reasonably, quickly and informally”. It has not done so: both my complaints are now subject to further court actions. The FOS determinations were conspicuously unfair and unreasonable; they were not quick. And the “informality” is a highly undesirable mix of Wonderland wilfulness with an obsession with pointless, box-ticking bureaucratic process.
But while I won my cases when I issued court proceedings, sadly the suggestions I made for improving the service seem (like other communications to the organisation) to have been ignored. So it was not with great optimism that I referred another financial institution to the service, in May this year.
The case itself concerned a fund manager’s failure to comply with disclosure obligations introduced in the retail distribution review: this resulted in my paying excessive fees for a period the manager refused to disclose. The allegation was that this was in breach of contract and of FCA principles. By July a junior “adjudicator” had issued his assessment, in which he concluded that the FOS should not consider the case since the fund manager was merely exercising his legitimate commercial judgment (this is a provision designed simply to avoid time-wasting complaints that banks are paying too little for deposits etc., but it doesn’t permit them to ignore complaints about breaches of rules). In any case, I had only myself to blame as I should have read the small print before I bought the product. The fact that the breach I complained of occurred some years after I bought the product was to him as irrelevant as that the fund manager’s actions were in breach of their own contractual terms.
My only option was to refer the case to the ombudsman. A note to the chief executive in July was ignored. The case continued to be handled by the same adjudicator despite my protests, and he categorically refused to give me an indication of when the case would get to an ombudsman. So I asked how many cases were in the queue; how many were decided each year; and how the queue was managed. This was transferred to the Freedom of Information team, who waited to the last day before not providing me with the information I needed (or otherwise complying with the act).
A note to the new CEO at least resulted in some further discussion with other staff – but not in an immediate reference to an ombudsman: rather I was repeatedly told in one conversation that the service worked to a six month target from the point at which the adjudicator agrees to refer the matter to an ombudsman (in the meantime another adjudicator could review it). The FCA Handbook (DISP 3.5) requires the ombudsman “to attempt to resolve complaints at the earliest possible stage.” This is a complaint which will affect tens of thousands of other investors, and the fund manager concerned will do nothing until a finding is made against them. The FCA will not intervene on the strength of an individual’s complaint.
A second adjudicator was put onto the case: it is however too tedious to list all the contortions he went through to conclude that the first adjudicator had been right. One example: the obligation to manage conflicts of interest didn’t arise because (it seems) the adjudicator saw no conflict of interest between a firm seeking to protect a significant level of excessive fee income and the interests of its clients in being able to avoid such fees. He then concluded that the fact that some unitholders were paying fees four times higher than others was fine because the information was “freely and publically [sic] available” – although he had previously been unable to figure out how the pricing worked from the websites without guidance from me and the fund manager. This level of unfairness is surely well beyond Lord Sumption’s tipping point.
Sadly the idea that the fund manager was merely exercising his normal commercial judgment may be right: most financial institutions regard the cheating of customers as routine. It’s a calculated risk that the FOS won’t be asked, won’t understand or won’t bother to take action, and that virtually no one will litigate. That’s why a proper, effective ombudsman service is essential. We still don’t have one.