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A consumer&#39s view

BBC Radio 4&#39s Money Box programme has cast a searchlight on the workings of the Financial Ombudsman Service and questioned whether members of the public are getting a fair service.

In particular, it looked at the FOS staff bonus scheme, which rewards case workers for settling disputes quickly. The ombudsman has defended the system and maintains that it is not unreasonable to link pay to performance. But the BBC is not the only organisation to question what is going on at the FOS.

Anyone in our industry who deals with members of the public will find a growing number of complaints in their mail over cases which have been dismissed by the ombudsman. Some of the decisions that I have seen are simply factually incorrect.

For example, one complaint was thrown out by the ombudsman because the life policy had been taken out before the provisions of the 1986 Financial Services Act came into effect.

That was true but the current owner had purchased the policy in the market in 1999 and was complaining about what the Tep broker had claimed for the policy. Clearly, the case worker had either misunderstood what was a very clear letter from the investor or was trying to get rid of the complaint.

Many valid claims are dismissed on the technical point that the consumer is complaining about the investment performance of a product. Clearly, if this is the case, the FOS cannot investigate.

But the reality of the situation is very often not that the product has not performed as well as hoped but that the person should never have been sold the product in the first place because they had no idea that they could lose money.

The FOS admits that it wants members of the public who have complaints to contact the FOS by telephone so that caseworkers can get a feel for the type of person they are dealing with.

David Cresswell of the FOS maintains that some members of the public are effectively being coached in how to make a complaint and are claiming that they were missold a product when, in fact, they are simply disappointed with the investment performance.

This may be true but there are still a growing number of cases where the FOS decision has been patently wrong. Money Box makes the important point that the UK has what is regarded as the world&#39s most powerful and all-embracing financial ombudsman service and that it is vital for everyone who uses the service to have full trust in its ability to fight for fairness and settle disputes correctly.

There is no doubt that the endowment misselling debacle is putting a huge strain on the system. The FOS received 98,000 new complaints to deal with in the year up to the end of March 2004 – a 57 per cent annual increase.

It would be very sad if this massive increase in the workload was leading to mistakes and a breakdown in trust in a system which has, arguably, done more to improve the lot of consumers who use the financial services industry than all the rest of the regulatory system put together.

The FOS&#39s own research into how it is regarded by the industry shows that most IFAs and product providers are reasonably happy with the FOS. Around 147 firms completed questionnaires and some 70 per cent of the firms that responded thought that the decisions made by the FOS are generally fair.

Eighty-five per cent felt able to challenge the views expressed by adjudicators although only 14 per cent did so regularly.

Some 90 per cent agreed that the FOS was a better alternative to the courts and 90 per cent said they understood how complaints were handled while 75 per cent thought that the FOS had upheld a reasonable proportion of the complaints made against their firm.

There is always going to be a gap between the unreasonable expectations of some complainants and the ombudsman&#39s decisions but the FOS must find the time to train and pay its staff properly to maintain the trust of both the public and the financial services industry.

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