Financial Ombudsman Considers Implementing Charges for Claims Companies and Law Firms

The Financial Ombudsman Service (FOS) is currently considering the prospect of imposing charges on claims management companies and no-win, no-fee law firms for submitting complaints, marking a departure from its previous position just one year ago. While reaffirming its commitment to offering free complaint services for consumers, the FOS is soliciting feedback on the potential implementation of charges for complaints from claims management companies and other professional representatives, citing a notable increase in the volume of cases being handled.

James Dipple-Johnstone, the deputy chief ombudsman at FOS, has underscored the necessity of re-evaluating the fee structure to ensure its alignment with the current surge in cases and the accurate reflection of costs incurred in resolving disputes for customers. The enhanced powers granted to the FOS under the Financial Services and Markets Act now empower the organization to levy charges for these types of claims, should it opt to do so.

The decision to explore the introduction of charges for professional representatives follows a marked upsurge in cases from these entities, as well as diverse conduct within the sector, which impacts the FOS’s ability to assist other customers and elongates the duration of individual cases.

The FOS is contemplating an initial charge of £50 to £200 for preliminary case work, contingent upon complexity, and a possible fee of £650 upon the resolution of each case to cover expenses related to case conversion, casework time, and other pertinent costs. However, the organization is also proposing that the first three complaints lodged by professional representatives would be exempt from charges.

The consultation period for these proposals is open until January 30, and the FOS is seeking input on various facets such as the fee levels, potential impact on different groups of complainants, and the lead time required for businesses and professional representatives to adapt to the changes.

In tandem with these potential adjustments, the FOS has delineated its plans and budget for 2024-25, with a forecast of 181,300 new complaints about financial providers in the forthcoming financial year. The organization aims to decrease the cost of its services to the industry, with a suggested reduction of £100 per case in the case fee to £650. Collectively, these modifications are expected to lead to a substantial £60 million reduction in case fee and levy costs to businesses, with the FOS also introducing a new target of resolving 90% of cases within five months.