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Blog: FOS didn’t deserve the Channel 4 treatment

Justin Cash, Editor of Money MarketingI’ve just finished watching last night’s Channel 4 Dispatches special on the Financial Ombudsman Service. First things first, I rate Dispatches incredibly highly. I was fortunate enough to work on one of its investigations back in my journalist training, and I can attest to the intellectual and journalistic prowess of the people on that team.

That’s why I found it particularly disappointing the show promoted a number of persistent myths about the service. I’m not saying the FOS is perfect – far from it – but there are some areas where criticism has been unwarranted.

The role of the FOS

One of the case studies used in the film featured a woman who complained to the FOS after she was the victim of fraud and her bank account was drained. Her complaint was rejected by the ombudsman, but she says a fraud specialist later discovered the bank was aware of the breach and did not stop it.

She says: “I thought the FOS was there to represent the individual, the ordinary person, to challenge the bank.”

This comment is a perfect example of a misconception over what the FOS does. If she wants someone to take on the banks, she needs a lawyer, or maybe the police; not the FOS, which is an impartial arbitration service. The whole point is that it does not represent anyone.

The title of the documentary demonstrated the same inaccuracy: “Who’s policing your bank?”

The FOS does not “police” your bank. That’s the job of the FCA and would imply the FOS had even a speck of control over the kind of conduct risk that led to payment protection insurance and endowment misselling – historically by far and away the bulk of its workload.

Lack of specialism?

Some of the most serious accusations in the film surround a lack of training and specialist knowledge among adjudicators. Staff reported feeling underprepared for complex cases and having to Google products they were unfamiliar with.

This ignores the fact there is an inherent trade-off between thinking the FOS costs too much – a common complaint – and needing expertise to staff it.

There is also a case to be made that “experts” in particular subjects tend to think in similar ways; an echo chamber effect of moving in the same circles and learning from the same material.

The FOS tried having more dedicated specialists several years ago. It did not work. All that happened was that the backlog built up and experts had to be paid on a retainer basis to cover niche cases whenever they came in.

The real skills an ombudsman needs are generalist: the ability to request the right information, interpret it dispassionately and deal with tempers flaring on both sides.

The FOS has a six-month training programme. Maybe that is not enough. But it would require an inhuman level of omniscience for any one person to be an expert of every new and esoteric product that entered the market.

Investigators may well feel they have not had enough training after six months. They may feel they will never know enough about a particular product or complaint type. But that does not mean they can’t arbitrate effectively and come to a reasonable decision.

Inherent bias?

The documentary moves on to show the Arnold Schwarzenegger PPI deadline awareness advert (designed by the FCA, not the FOS) to allege thousands of claims were potentially turned away unfairly and that, overall, the FOS could be acting in favour of large financial organisations over consumers.

The fact is that 66 per cent of PPI claims were upheld in 2015/16 – higher than all other types of complaints. Given 85 per cent of all PPI complaints were bought by claims management companies, known for mass email and cold-calling operations and who would have little idea whether or not the individual actually had a valid claim, that two-thirds were valid does not sound unreasonable.

The biggest banks are the only ones that make significant payments for the FOS. Unless you have more than 25 complaints, your actual FOS bill is minimal because you don’t pay for cases until that point.

While that is great for IFAs, for example, there is an argument it creates an incentive for the FOS to serve the banking sector that pays its wages. Fifty-seven per cent of claims do go in favour of banks, true. But that does not mean the organisation has an inherent bias against consumers. For each business or product type, there will be personal opinions held by the individual adjudicators.Looking for neutral people on huge financial issues is like looking for a needle in a haystack.

It’s the same with journalists. Because we are human, we have particular feelings about particular companies or debates. It doesn’t mean we can never write about those businesses or issues.

There are more than 2,000 staff at the FOS. There is no way they all happen to have had a pre-determined hatred of consumers. Or financial services companies for that matter. The uphold rate against IFAs, for example, is only around 30 per cent, and many complaints will have been withdrawn on the advice of the adjudicators before they get to a final decision anyway.

For all its flaws, the FOS didn’t deserve the Channel 4 treatment.

Justin Cash is editor of Money Marketing. Follow him on Twitter @Justin_Cash_1


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There are 31 comments at the moment, we would love to hear your opinion too.

  1. You really cannot be serious. The adjudicators came across as clueless. Even their own number were highly critical and no less a figure than Dame Ros Altmann was appalled.

    Sure some people have a misconception of the FOS, but that doesn’t excuse the ineptitude on display in the programme.

    After watching it I didn’t notice on mention of IFAs or Financial Advisers in general (apart from Banks).

    It did rather seem to me that the banks get a very easy ride as adjudicators don’t want the bother (or have the knowledge) of dealing with large organisations. As one customer put it “Like kicking a battleship”. Anyway your view in your example is at variance with the other highly qualified commentators on that particular case.

    I couldn’t help coming to a conclusion that financial advisers get a kicking because they are easy meat compared to the banks. One might reasonably wonder if the organisation is even fit for purpose. And I wonder why Caroline Wayman didn’t appear to respond to some of the points. That doesn’t play well either.

    Is that an unfair conclusion?

    • Caroline didn’t respond because the organisation didn’t get to see the programme before it aired. How could she respond to unknown points and questions?

      Undercover reporting? If there’s so much wrong with the organisation, they wouldn’t have needed a spy for several months to get a few bad snippets which aren’t representative of the opinions of the vast majority. A few people were caught saying things off the cuff (wrongly, but it doesn’t mean they can’t handle a case fairly.)

      And so little context. Did the lady who got scammed accidentally give out her password or PIN? Did the lady who took out PPI sign a form to say she wanted it? Who knows. We only got one side in a massively biased programme.

      There’s talk of demotivated/pressured staff etc. How should they be motivated? Send a spy in so no one feels they can trust anyone again! That’ll motivate people.

      As the article says, FOS isn’t a consumer champion. In fact consumers seem to hate it. Businesses seem to hate it. Is that because the uphold rate is somewhere around 50%? There’s an unhappy party in every case. An invested consumer vs a business that tried and failed to resolve the issue already.

      Pay isn’t reduced if targets aren’t met. What happens is people can be demoted if they repeatedly do less work than the majority of their peers. It takes months before such drastic action would be taken.

      That’s my take on all of it

  2. Sorry, Justin, the FOS has not been for for purpose since it was thrust upon us in December 2001 with labyrinthine rules written by the FSA which over-rode UK law and removed the 15 year long stoop.

    The design of FOS is clearly a sop to the consumer because, as we all know, no politician ever lost a vote by waving the consumer flag.

    When I visited South Quay at the invitation of then Chief Ombudsman Walter Merricks, it was designed to whitewash the shabby edifice and he kept me well away from the adjudicators. He did feed me beef sandwiches and freshly squeezed orange juice though.

    No adviser can feel secure when a FOS investigation starts because the basic tenets of UK law are ignored in favour of assumption and ignorance.

    We all know when we’ve made errors and similarly we know when we haven’t. Thousands of advisers will be happy to tell you about cases where amazing adjudications/Ombudsman decisions have been reached that are quite simply wrong.

  3. Oliver Longhurst 13th March 2018 at 11:38 am

    I was intrigued by the “PPI Consultant” Mark Davies.

    A Google search seems to suggest he works for a large claims management company who will likely have an inherent bias and vested interest in reopening as many cases as possible.

    I’m not sure dispatches disclosed this about him?

  4. Sorry Justin, I have to disagree with you on this one. The FOS arrogantly defends the lack of appeals process on the basis it never makes any mistakes. The fair and reasonableness test is not only a very low bar but also leads to inconsistent outcomes. FOS needs to apply common law principles to gain any credibility.

  5. MMMM.
    There are more than 2,000 staff at the FOS. There is no way they all happen to have had a pre-determined hatred of consumers. Or financial services companies for that matter.

    Oh Really Justin? FOS staff are recruited by adverts encouraging them help “keep fairness at the heart of what we do”. Add to that a concentration on a diversity agenda and one can imagine the dewy-eyed idealists that are attracted.

    Justin – you owe me a call

    • This really is a disgraceful comment based on nothing but some warped opinion. ‘Fairness’ its an OMBUDSMAN – you know independent, impartial – FAIR!

      And as for the ‘diversity’ swipe – are you serious! ‘dewy-eyed idealists’? What is wrong with you?

      Do you not believe in diversity? Do you not think the Financial ombudsman should have a diversity agenda – would you prefer it if it were staffed by people with the same background, culture and opinion – Because that doesn’t sound very impartial or independent.

  6. The real issue here is if the FOS can’t deal with simple stuff like PPI and pay day loans. How on earth can they handle the complex investment and pensions industry?

    Answer…they can’t. The FOS is full of under qualified, incompetent and failed other professionals from other industry.

    Roll on a full audit on the biggest ambulance chaser in the world.

  7. Until the FOS reverts to the tenet of following the practice of common law and not looking at itself as omniscient and above the law there will always be problems.

    They do a generally good job in, I have to say, somewhat trying circumstances and it is very easy to be sensationalist about their mistakes, spectacularly wrong headed though they may be at times. However, a little bit of humility would not hurt!

    There is no way Justin that a generalist can have even the most basic of knowledge concerning the vast array of financial products that are or have been available in the market. What is needed is more expertise rather than less.

  8. 3 things spring to mind having watched dispatches.
    1) One of the adjudicators admitted that a lot of pension complainants knew more about their personal pension than she did. That scared me.
    2) The fact that targets were set for employees to hit. Not to achieve any bonus, but to hit their salary if these were not hit. That is disgraceful for such an organisation. What did they think would happen to case handling, once the staff found out they would get a reduction in salary for not hitting the target? Logic dictates they will take the route of least resistance.
    3) There was at least one ombudsman who had 18 months experience who said he regularly had no idea what he was doing.
    The lack of training (one girl was there working for 6 months and the investment course the undercover reporter went on was they first one this girl had ever been to) and lack of awareness/knowledge of products and how they work in real life was actually shocking.
    They should hang their heads in absolute shame because it is a total disgrace that people like this are allowed to be making decisions that affect other people’s lives.

  9. If you’re paying somebody to do something and they have no idea how do to that thing, you’re overpaying them; regardless of how much or little the actual cost is.

  10. When ajudicators let alone ombudspeople have powers similar to a county court judge
    in making judgements and awards then there needs to be the same level of accountability. It is an important component of fairness that an appeals process exists. The nearest to that is a judicial review of FOS awards. As Alan Lakey states elsewhere the FOS has been in existence since 2001 but how has it managed to survive without challenge in its existing form? Advisers operate in a parallel universe when it comes to the FOS. Merely bystanders witnessing rough justice with no defence.
    History tells us unsafe ‘convictions’ have a nasty habit of revisiting us.
    And so it should be!

    • FOS has an “inquisitorial remit” it can use to “make up a complaint” any which way it likes. I don’t believe English law has that power as part of its due process

    • Last I heard the FOS had survived 13 Judicial Reviews.

      Some years back Adviser Alliance undertook a Judicial review of the FOS and to do this the courts have to give their approval. In this case it wouldn’t so even if you have the funds you cannot obtain justice.

  11. The biggest problem at FOS is the sheer volume of complaints. Fixing the problem would be really easy. Just charge a nominal sum, say between £100 & £250 depending on the size of the complaint to access FOS. If you win you get it back, if you are on benefits you don’t pay. But at the moment complaining is free and there is zero risk to the complainant. Lying to the ombudsman is also penalty free – as long as you are the complainant. Levying a small charge, will get rid of most of the chancers and encourage the ambulance chasers to waste a bit less time; FOS will then have more capacity and justice could prevail…

  12. I haven’t watched the dispatches report to know if it is fair or not.
    Justin’s article is well written an I would very much like it to be true, but based on the comments above I think he might be living in a dream world.
    To add balance though I would add that as most advisers have never had ANY dealings with FOS (i’ve never been on the receiving end of them, just the supporting 2 clients end)of the many FOS DRN notices I read, I woudl tend to agree with their decisions about 80% of the time, whetehr for or against the complainent. There are about 20% I disagree with or the reasoning is unclear and it is this which concerns me as I think it too many and there needs to be some form of EXTERNAL oversight of their decisions which then can mean a case is passed back to the courts.
    The FOS as an alternative dsipute system needs changing not destroying. The FOS needs to engage with advisers more and I would suggest they attend the FCAs “Live and Local” and the PFS seminars more often and actually DISCUSS DRN cases we have concerns with as they are annonymised as far as the consumer is concerned anyway.

  13. My experience with FOS has been somewhat mixed.

    They have some very good staff, and some not so good ones.

    In my view, any bias is in favour of the customers, not the firm.

    An uphold rate of 50%, is fairly high, when you add on the complaints uphold by the firm.

    As for googling complex products, I would far rather they do some research.

    What makes me mad, is people who blag it.

    Always best to say I will find out.

  14. I have not yet seen the documentary, but like many others, I have personal experience of the FOS and read many an adjudication, where the following clearly apply:
    1.) the “ombudsman” clearly has not a clue what they are talking about.
    2.) Basic law and FCA guidance has been ignored to champion the cause of someone who has clearly been stupid, and who thinks they hold no responsibility for their own actions.
    3.) Where they find in favour of a “complaint”, despite it being absolutely clearly documented that the client was told exactly what they were getting into, but heck, why should anyone be responsible for their own actions.

    Ironically if the documentary shows that they have no idea about the products they are dealing with, it rather shows what I’ve been saying now for years. The entire industry now operates and trains people on the basis of regulation and wrappers, with virtually no training about the actual products in the marketplace.

    I was lucky, I started in 1997 and had 3 months of solid product training before I did anything else.

    • Worrying to read this from what appears to be someone that was involved in the process somehow. Hopefully other adjudicators don’t judge the consumer like this…

      • I think you may wish to actually read my comment, I think it’s fairly clear I am criticising the FoS not pre judging the “consumer”.

        I’m not an adjudicator at the FoS. However I have seen a huge number of files relating to complaints over the last 20 years.

        In many cases the documentation was pathetic, so there was little choice but to uphold the complaint. In modest and falling all the time number of cases, the adviser had clearly given bad advice (either through lack of knowledge, lack of CPD or because of ethical issues.

        However there have also been a significant number I’ve seen where the “client” is clearly either trying it on, trying to commit fraud, or is in denial as to any responsibility they might hold for their own actions.

        That’s not “pre judging”, it’s a statement of fact. To give a few examples.

        1.) Advisers complaining about endowments they sold themselves.
        2.) Clients complaining about not understanding the risks associated with stock market investments, whilst trying to avoid disclosing that they are and have been a stockbroker for the last 35 years.
        3.) Clients saying they were told something was guaranteed, whilst being unable to provide any evidence that it was. With the documentation that they do supply and that’s in the file being very clear that the thing was not guaranteed.
        4.) Clients changing their stories multiple times as they realise that they aren’t going to win and sometimes completely contradicting themselves.

        And many more.

        However I have also seen and read more than a few “adjudications” by the FoS. Most appear to have been “reasonable”, however a modest but significant number fall into the catagory where quite clearly the person “adjudicating” was just making it up as they went along. That might be that they were rejecting the complaint, or upholding it.

  15. Were the FOS not snowed under with (initially rejected) complaints about PPI, it might well be able to allocate more of its resources to staff training and be more selective about the calibre of staff it recruits.

    Though it was unfair of Ch.4 not to have shown the programme to the FOS before it went out and given Caroline Wayman an opportunity to comment, one wonders what she might have said. Being brutally honest, she might have said that were the FSA to have done its job properly, we wouldn’t be in this mess. But, for that, she’d probably be fired.

  16. I think the structure and powers of FOS were flawed at outset. Also its funding is flawed if it is to be truly independent.

    A legal structure is not fair if one side enters the fray knowing it has nothing to lose but can still appeal and go to court (unlikely Q.E.D.)

    This is why claims management firms are in business. They play a percentage game by advertising heavily. Just as no win, no fee solicitors play the ‘had an accident not your fault card’ because they know that insurers will pay out below a certain level.

    In principle FOS is a good thing but was flawed at outset, that’s why it is snowed under with claims. And its M.O. can never be justice for all parties. Apart from the claims management companies that is!

    • The reason the FOS is snowed under with complaints about PPI is that the FSA ~ on Hector Sants’ watch ~ did NOTHING to stem the orgy of mis-selling indulged in by the banks over several years. It FAILED abysmally to fulfil its statutory obligations to protect consumers. Its claim on its home page that this is what is does is nothing short of a brazen lie, which may have been reported to the ASA but nothing has been done. Sants should be stripped of his knighthood, but he obviously has friends in high places so that will never happen.

  17. I have to say this stinks of hypocrisy. Firstly you are defending the FOS but then attacking CMC’s and suggesting they don’t know about the strength of a claim before submitting and that they are speculative. Complete misinformation and irresponsible as people actually believe it. To defend the FOS when they are bang to rights and talk about objective journalism in the same article, insults the intelligence of the reader. Totally disagree with pretty much everything written in this article…

  18. What, I wonder, would be my chances of success if I were to apply for a job adjudicating over complaints against accountants and solicitors, even though I hold no qualifications in either field?

    • Appears you don’t need qualifications to be an investigator at the Legal Ombudsman – The lack of knowledge on display amongst FOS staff in the documentary was worrying, and the strict targets they face are more akin to an old-fashioned sales environment rather than an adjudication service. Unfortunately were all FOS adjudicators required to have an advice diploma or similar case fees and levies would soar. Also, how many qualified advisers would actually want to work there?

  19. “not the FOS, which is an impartial arbitration service”

    How impartial? Would be interesting to see data on uphelds across sectors and how much influence there is based on FSA spotlights at any time.

  20. I once read a FOS decision, in which the adviser had actually complained with a comment along the lines of “You’re 24 years old, no qualifications, industry experience and with the benefit of hindsight want to judge the advice I’ve given” etc to which the FOS replied “you do not have to be a connoisseur of fine wine to know that the bottle is corked”. Very much enjoyed that but therein lies the problem.

  21. Justin

    Unfortunately on this occasion I really think you have shot yourself in the foot. Apart from all the other comments you need to refer to todays Times (19th March) business section – Page 39. Alan Freedman worked for the FOS and one of its predecessors for almost 25 years also has the view that they are a very long way from adequate.

    I wouldn’t dispute that the FOS has good intentions, but unfortunately the road to hell is paved with good intentions.

    It would seem that defenders of the FOS are trying to defend the indefensible, which is a shame. On the only occasion I had dealings with them – several years ago and well before PPI and CMC sharks, I found them rather good. It seems to point to them trying to do too much with too little. Perhaps CMCs should never have gone to the FOS in the first place and they should have steered the whole issue to lawyers to instigate a class action.

    The FOS have been overambitious with the assets at their disposal.

  22. Clearly you haven’t had to deal with the Ombudsman. Your article is also biased only giving one side without investigating yourself!

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