Or you breach your agreed overdraft limit by 42p, at which point, the bank sends you a letter telling you that you will be charged a £25 “facility fee” permitting you to do so, plus an extra £9 daily charge for the fact that you did make use of it.
When you ask for some understanding, you get a snotty letter back telling you that the institution in question is perfectly entitled to interpret the law or its contractual obligations in that manner. And it intends to follow that interpret- ation to the letter.
I still remember the incredulity and rage at a letter from Transport for London, forwarded to me in Italy, telling me that my appeal against a parking ticket would be rejected unless I could come up with a witnessed document within 72 hours. When I rang them to ask for more time because I was sorting out my dad’s affairs after he had passed away, I was told this was not possible.
If you have ever had the same experience, you will understand why I felt so uncomfortable reading the comment column in last week’s Money Marketing from well respected barrister Peter Hamilton.
In it, he told the Financial Ombudsman Service that it “must learn to live within the law” over its attempt to persuade an IFA firm to pay out on an award whose time limit had expired.
The background is that the FOS made an award and informed the complainants that they tell it in writing before July 30 last year whether they accepted or rejected the ruling.
At the same time, the FOS wrote to the firm, telling it that unless it received a written acceptance from the complainants before that date, neither side would be bound by the decision.
As it turned out, the FOS received the complainants’ acceptance letter on July 30, the day after the deadline had passed.
The ombudsman wrote to the IFA concerned, trying to get the firm to honour the award regardless.
Not surprisingly, the firm had other ideas. At which point, the FOS wrote to the firm: “In light of the more principle-based regulation being championed by the Financial Services Authority under their treating customers fairly banner, [we are] sure that they will want to hear from us about a firm which is not prepared to honour an ombudsman’s award in circumstances such as these.”
Let’s not mince words – the IFA firm was clearly within its legal right to act as it did. As Peter Hamilton, a renowned legal expert in this field explains, the Financial Services and Markets Act 2000 says a complainant must notify the FOS within a specified date whether he accepts or rejects a given ruling. If he does not, he is to be treated as having rejected it.
In doing so, the FOS is “attempting to make the firm part with money without legal authority,” according to Hamilton.
He argues that the FOS is “looking to the FSA to take some form of disciplinary or other regulatory action against the firm on the grounds that the firm has not treated its customers fairly.”
And if were actually persuaded to take action against the IFA on such grounds, then the FSA itself would be acting in breach of the FSMA, Hamilton adds.
At this stage, we need to be very clear as to what the FOS is doing. First, its actions undeniably constitute a threat. But what exactly is the nature of this threat? Is it really saying that it will call on the FSA to act against to the IFA specifically because it has not paid due regard to the regulator’s sixth principle – that all firms should “pay due regard to the interests of their customers and treat them fairly” – in this specific instance?
I don’t believe that for a second. In my opinion, the FOS was suggesting that if an IFA chooses to interpret its obligations strictly according to the letter of the law, then it is perfectly entitled to do so.
But equally, the regulator is also entitled to act on the basis of a tip-off and look carefully at a member firm that operates in this way, to see whether it does always treat customers fairly in all other aspects of its relationship with them.
In other words, if you act a certain way over one issue, there is a possibility that you will behave in a similar manner about other matters too.
The obvious equivalent is that of a policeman who stops a motorist for some minor matter that in and of itself is not an offence. A quick smell of that person’s breath suggests that he is actually over the drink-drive limit.
Yes, the FOS must learn to live within the law. I believe that notwithstanding its admittedly cack-handed approach it was actually doing so. It is the IFA firm – and its backers – who should consider their position – just because you are legally in the clear does not make it morally right.
Nic Cicutti can be contacted at firstname.lastname@example.org