As part of his review of the Financial Ombudsman Service, Hunt says such a fee levelled against claim management Hunt review recommendations
firms would guard against them bombarding the FOS with vexatious cases. He said the FOS should work with the Ministry of Justice to ensure such a fee was not passed on to consumers.
The report says the FOS should pressurise the Government to improve the advertising standards of claim management firms, suggesting they should carry “wealth warnings” to alert users of the cost and alternatives available.
The review says: “The FOS should press the claim management regulator operating under the aegis of the Ministry of Justice, in close consultation with the Advertising Standards Authority, to insist that advertising by claim management companies makes clear the level of charges faced by consumers and also the fact that the FOS service itself is available free of charge.”
The review says that claim-chasers should pay an FOS levy as they derive “commercial benefit” from the service.
Hunt says: “I have been watching with growing concern the way in which claims-farmers are milking the system and extracting out of a complainant a substantial part of the compensation to which they are rightfully entitled and which they would have received via the free service from the ombudsman. It is right that complaints should be brought where they are justified but there is no justification for bypassing the free financial ombudsman service which going to a claims-farmer does.”
Introduce a case fee for vexatious claims put forward by claim management companies and work with the Ministry of Justice to prevent such fees being passed on to consumers.
Press the claim management regulator to insist that advertising by claim management companies makes clear the level of charges and the fact that the FOS service is free.
Work with the FSA and Ministry of Justice so that regulated claim managers pay an FOS levy.
Commission a more user-friendly and better understood brand name for the FOS, possibly the Financial Complaints Service.
Seek to ensure decision letters always contain the proposed amount of compensation rather than a formula.
An appeals mechanism is not needed.
Announce each year the worst performer in terms of uphold rates in retail banking, investments, general insurance, intermediation in investments and intermediation in general insurance.
Do not introduce consumer case fees.
Introduce a higher case fee for “enforced deadlock” cases with effect from 2009-10 and report on the numbers of cases.
Investigate the option of differential fees for “assessment” and “investigation” cases as distinct from simple fast-tracked consumer credit cases.
Move as quickly as possible to a general policy of not charging a case fee in all cases found to be outside the FOS’s jurisdiction.
Develop a public interactive system, Fosbook, to give consumers and the industry a better understanding of the way the FOS reaches its decisions.
Press the FSA to include the FOS logo on the letterheads and websites of authorised firms.
The report hits out at the Financial Services Compensation Scheme. Lord Hunt states his “surprise” that the FSCS sees fit to reinvestigate cases where the FOS has found against a company that has subsequently gone bankrupt without paying compensation.
Lord Hunt believes it is do not possible to specify a long-stop date beyond which complaints cannot be considered because the point at which the customer becomes aware of possible detriment will vary significantly.