A judge has ruled the Financial Ombudsman Service is wrong to charge advisers a case fee if a case is rejected in a move that could force a fundamental restructure of the organisation’s funding.
Judge Rutherford of Trowbridge County Court found the FOS’s practice of charging firms for the cost of dealing with complaints that are rejected to be “unfair in principle and in practice”. The story was revealed by moneymarketing.co.uk.
Judge Rutherford ruled that “no reasonable public body would maintain and enforce such a rule”. He dismissed the claim and ordered the FOS to pay costs of £2,812.
The ombudsman service brought the case against IFAs Brian and Dolly Pickering after they refused to pay four case fees of £360 each.
The FOS is appealing against the ruling but compliance consultant Adam Samuel says it may not secure an appeal date in the next 12 months as it was found to have wasted a May 2007 hearing date after failing to disclose documents in time.
FOS spokeswoman Emma Parker denies there will bean appeal delay and says the ruling does not alter the legal requirement on all other businesses to pay case fees. She says: “It touches on some wider issues about how we are funded so we will be appealing.”
Law firm Shakespeare Putsman partner Gareth Fatchett believes advisers should withhold case fees until the appeal. He says: “I would advise IFA firms who are being asked to pay the case fee to refuse and ask for the matter to be referred to court.”
The FOS also confirmed to Money Marketing this week that an average of only 10 cases a year out of 100,000 are considered frivolous or vexatious by the FOS, meaning the adviser escapes the fee. Parker says this is due in part to an initial screening process which weeds out 86 per cent of complaints.
Highclere Financial Services partner Alan Lakey says: “These victories are gradually turning back the clock to the pre-FSMA days when the various ombudsman bodies had to comply with law.”