Lord Hunt says reforming the current system of case fees, such as by introducing a “polluter pays” scheme, would introduce its own problems.
The report claims that the dangers of shifting to outcome-related case fees would “outweigh the putative benefits” as such a structure would reduce the incentive for adviser firms to investigate complaints adequately.
Hunt says: “Why invest heavily in your own dispute resolution service if you can simply pass the work to the FOS, secure in the knowledge that you will face no charge for the cases which you win?”
The report says the incentives for the FOS would be “equally odd”. Hunt says: “If the organisation’s cashflow and ultimate survival depend on a flow of guilty verdicts, there is a danger of economic incentives having an impact on decision-making that would be highly inappropriate.”
This comes despite the recent ruling in the county court which suggested that the FOS was unfair to charge advisers for rejected claims – a ruling the FOS is appealing and that Hunt acknowledges in his report.
The review also warns against introducing charges for consumers who make complaints. Hunt says he doubts whether many vexatious complainants would be deterred and proposes a greater focus on clear and transparent filtering rather than a blanket imposition of fees.
The report also recommends that the FOS should introduce a higher case fee for “enforced deadlock” cases from 2009-10.
Hunt says: “I do believe there is a strong case for penalising firms which, whether by deliberate decision or through plain incompetence, drag out the initial stages of complaint handling to the detriment of the customer and thereby generate additional costs for the FOS.
“It would be relatively easy to introduce a higher case fee for cases where a firm has failed to meet its obligation under Disp to issue a final response or a letter indicating when it expects to issue a final response in the initial eight-week period.”