The Financial Ombudsman Service has today set out its proposed changes to its fee structure, following the introduction of legislation in Parliament.
The Ombudsman proposes to charge Claims Management Companies and other professional representatives up to £250 to lodge a case, reduced to £75 if the case outcome is in favour of the consumer. The service remains free to those who bring their case directly to the service, as well as families and friends, charities, and voluntary organisations who may be helping them.
The proposed new case fees are detailed as part of a consultation launched by the Financial Ombudsman, the free and independent service set up to resolve disputes between consumers and financial businesses.
Under the proposals, consumers would continue to be able to bring cases directly to the resolution service totally free of charge. However, cases brought by Claims Management Companies (CMCs) or professional representatives would qualify for the new fees. Businesses responding to a complaint presently pay £650 per case.
The Ombudsman is seeking to make its fee model fairer by recovering some of its costs from CMCs and representatives as well as financial services firms.
As is the case for financial services firms, all professional representatives will be allowed three free cases a year, beyond that they will be charged the £250 fee – reduced to £75 if the consumer’s complaint is upheld. Under the proposals the Financial Ombudsman Service will not benefit either way from decisions. If the service does not uphold the complaint, the higher fee collected will be used to reduce the fee for the financial business against whom the complaint was initially raised.
James Dipple-Johnstone, Deputy Chief Ombudsman at the Financial Ombudsman Service, said:
“We are committed to improving our service so it is as easy to use and accessible as possible, while ensuring it remains free for all consumers and that those with upheld complaints can keep all of any award we make.
“Professional representatives can play an important role in resolving financial disputes. However, they gain financially from our service without contributing to the running costs, and with little incentive to ensure that claims they advance have merit.
“The new proposed charges are important to ensure we cover the costs associated with helping resolve disputes and we feel reflect a fairer allocation of those costs.
“We welcome all views on our proposed fee changes.”
The Government has begun the process of exercising powers given under the Financial Services and Markets Act 2023 to allow the Ombudsman Service to update its current fee-charging framework. This will allow the Ombudsman to charge CMCs and other relevant professional representatives.
Over the last two years, 20% of cases referred to the service have been brought by professional representatives. Of these cases, fewer than 25% result in a different outcome for the complainant than they have already been offered by the responding firm. Consumers bringing their case without representation achieve greater success with around 32% achieving a better outcome.
Where complaints are upheld, CMCs and professional representatives take a significant proportion of redress awarded to their clients. Consumers would keep the full value of any redress awarded if they brought the case to the Ombudsman themselves.
Irrespective of the outcome of an investigation, all financial firms currently pay a £650 fee for each case brought to the Ombudsman, as well as an annual levy.
Today’s announcement follows on from earlier consultations, with the proposal of a charging regime for representatives receiving broad support. The new document sets out the proposed fee mechanism and how much firms should be charged. All feedback and supporting evidence will be considered carefully before proposals are finalised in the autumn.
The consultation is open until 4 July 2024 and is published on the Financial Ombudsman Service website.
