Advisers, intermediaries, insurers and other financial services firms could be forced to pay fees for complaints made to the Financial Ombudsman Service (FOS) when they are submitted.
This would reverse the current position where respondent firms are invoiced after the case has been decided.
The change is being floated following protests by the claims management industry that paying fees on submission of a complaint, as is being introduced for those firms, will be unfair.
At present the FOS charges a fee when a case handler formally investigates a complaint against a firm.
Respondent firms are not charged for the first three complaints against their business in each financial year but from the fourth complaint onwards a fee of £650 is charged for each case.
The FOS collects the fee from the complained about firm once the case has been concluded regardless of the outcome, however it is considering bringing this cost forward to be paid once the investigation begins.
The ombudsman revealed the possible change when confirming it would levy a £250 fee per case for claims management companies (CMCs) on submission with a £175 rebate if the complaint is successful. CMCs will be given 10 free complaints per year.
Tens of thousands of cases
Illustrating the scale of the impact CMCs had on the service, the FOS noted it has seen a significant rise in complaints from CMCs totalling tens of thousands of cases across different product areas and complaint issues simultaneously.
In a substantial proportion of these cases the matter is being withdrawn or abandoned by the complainant or CMC, or the matter is not determined in favour of the complainant.
“In these circumstances, where our costs are incurred from the point at which the complaint is referred to our service, we feel it is proportionate for the fee to be chargeable at the same point,” the FOS added.
‘Unfair’ charging model
The consultation on charges for the CMC sector received sharply divided responses with the CMC industry strongly against fees being introduced while financial services firms were unanimously in support. Consumer groups also supported fees being introduced for CMCs.
However the FOS was swayed by some of the CMC sector responses and is looking to accommodate them.
“A number of claims management industry respondents told us that it is unfair to have a different charging model than that of the one for respondent businesses where our service invoices a case fee upon resolution of the complaint,” the FOS said.
“This unequal treatment argument was cited on the basis of CMCs and other professional representatives instead having to pay a case fee at the beginning of our case handling process – whereas most respondent businesses currently pay once the case is closed.”
The FOS continued: “We see that there could be a reasonable argument for enhancing the consistency in our approach between CMCs and other professional representatives and respondent firms.
“Our service therefore commits to considering an alteration to our charging method for respondent firms to one that means we would ask for repayment on more similar terms, i.e., upon referral of the complaint to our service.
“In accordance with the statutory process for such a change to our rules, we would consult in a future strategic plan and budget consultation on bringing payment terms into closer alignment and provide further detail on our proposals in due course.”
