FOS asks IFAs if they will pay over £100k before judging case
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The Financial Ombudsman Service has started asking firms if they will pay more than £100,000 in redress before issuing a final decision, so complainants can decide whether to sue for compensation in court instead.
In November, Money Marketing revealed a High Court ruling which found a claimant who accepts a final decision from the ombudsman is bound by it and cannot sue for additional redress in the courts over the same complaint. The FOS can only make legally binding awards up to £100,000.
In a letter to a firm, seen by Money Marketing, the FOS asks if it will pay the balance if the redress recommended by an ombudsman exceeds £100,000.
It states: “If the ombudsman makes such an award and recommendation, would you please let me know whether your firm will or will not make payment in accordance with the ombudsman’s recommendation. We will then let the consumer know your answer so that they will be in an informed position to know how to proceed.”
A FOS spokeswoman says: “The ombudsman will, where appropriate, write to businesses in the context of a specific case to ask if they would intend paying any amount above £100,000, so that both the business and consumer know where they stand.”
Fishburns Solicitors partner Harriet Quiney (pictured), who represented the IFA firm in the High Court case, is warning advisers to be careful about how they answer these letters.
She says: “If firms commit to paying more than £100,000, it is important they put a limit on how much they are willing to pay.”
The FOS says it is questioning firms about their intention to pay above the limit and cannot bind firms to their answer.
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Readers' comments (6)
Anonymous | 16 Dec 2010 12:53 pm
Tell FOS we are not prepared to answer!
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Duncan Carter | 16 Dec 2010 1:21 pm
This is a crazy situation, IFA's already have too much uncertainty because of the approach FOS takes.
I'd be very wary of answering this question, whether it is deemed hypothetical or otherwise.
If a complainant feels they have 'real' evidence then they should feel confident to take 'proper' legal action and the risks associared with this.
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Michael Fallas | 16 Dec 2010 2:45 pm
More reasons to get out of this industry as no matter how good you think your advice there will always be the unknown and unforeseen which could act against you and with higher compensation limits everything gets more expensive including PI etc.
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M J Winfield | 16 Dec 2010 2:54 pm
An IFA cannot answer the question as it will invalidate Professional Indemnity Cover.
The question is loaded against small business and therefore discriminatory.
Is it the function of the F.O.S. to propose such questions?
Is the person making the complaint expected to put up £100000, for if the case goes against them, there is the question of Legal Cost?
Does the F.O.S. know what its function is? and how to succeed?
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Bob Donaldson | 16 Dec 2010 3:04 pm
Why not abandon FOS altogether and let the clients do what everyone else has to do put up or shut up and let the legal firms take the case on a no win no fee basis.
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Anonymous | 17 Dec 2010 11:25 am
What a farce.....
Obvious solution is to raise the FOS threshold. £1m should cover it.
If the customer is forced to go to court then effectively all IFAs become unregulated as there will be nobody enforcing the regulations other than the civil legal system!
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