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Trade bodies unite to call for FOS curbs

Seven financial services trade bodies are writing a joint letter to Treasury financial secretary Mark Hoban calling for the powers of the Financial Ombudsman Service to be curbed within the new regulatory structure.

The letter, a late draft of which has been seen by Money Marketing, is set to be signed by the Association of British Insurers, Aifa, the British Bankers’ Association, the Building Societies Association, the Council of Mortgage Lenders, the Association of Financial Mutuals and the UK Cards Association.

The seven believe current rules allow the FOS to go beyond its core function and take on roles that should be carried out by regulators, industry initiatives and market competition. The letter calls for the role of the FOS within the new regulatory architecture to be clearly defined in statute to provide greater clarity that firms will not be hit by retrospective interpretations of the rules.

It suggests the FOS should be removed from the process of determining issues with wider implications, which it carries out in conjunction with the FSA and the Office of Fair Trading.

The trade bodies believe the FOS should not have the right to prevent firms from seeking resolutions of test cases in court, as is the case in certain circumstances, and want regular reviews of the FOS’s overall operations, polices and procedures, alongside the planned National Audit Office audits. They also want the FOS to have to consult with stakeholders before issuing policy notes or guidance.

The letter suggests regulation of claim management comp- anies could be moved from the Ministry of Justice to the FCA remit to strengthen regulation.
An FOS spokesman says: “Our role is set out in statute and our relationship with the regulator underpinned by law. The wider-implication process has been enhanced with a coordination committee and the procedures under which a test case can be carried out is set out in law.”

Thameside Wealth director Tom Kean says: “For so many people to feel so negative towards them tells you something. We want a professional arbiter but they seem to have become a law unto themselves in our dealings with them over the years.”

The proposals of the seven trade bodies:

  • The FOS’s role and relationship with the Financial Conduct Authority to be clearly set out in statute to give firms confidence that if they comply with FCA regulations they will not face retrospective interpretations of the rules;
  • For the FOS to be removed from the process of determining regulatory issues with wider implications to stop the ombudsman straying into regulatory functions;
  • For consideration to be given to claim management companies being regulated by the FCA rather than the Ministry of Justice and to CMCs contributing to funding the ombudsman;
  • For the FOS’s right to prevent firms taking test cases to court when important or novel points of law are in evidence to be removed;
  • For the FCA to undertake regular reviews of the FOS’s operations, policies and procedures but not compromise the ombudsman’s operational independence;
  • That the FOS be required to consult with stakeholders before issuing policy notes or guidance.


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There are 11 comments at the moment, we would love to hear your opinion too.

  1. A welcome initiative, the FOS is not ticking IFA boxes right now. There is a survey being done by on the FOS- I understand it is still open with results going to Mark Garnier MP- results out next week-

  2. Finally a concerted move to illuminate this most illogical organisation. We had our first and only claim against us upheld by the FOS despite the fact that during an FSA TCF visit the file in question was picked by out, reviewed and passed by the visiting investigators.Their opinion was that the client “did not have a leg to stand on”? regarding their claim but eventually this bunch of inexperienced unqualified youths found on behalf of the client depite the fact that information requested from thenm was never forthcoming. Logic and Law were never involved. They are just not fit for purpose, does anybody regulate them? I think not!

  3. This addresses some of the issues that advisers have with the FOS but not all.

    In taking an inquisitorial role the FOS acrively seeks to review every aspect of the advice process as opposed to the issue that the consumer is complaining about. This allows them to be a consumer champion, a role which they vehemently argue that they do not take.

    Additionally, we are all onlt too aware that the levels of consistency are low, as proven by the last annual review when less than half of respondents considered them a consistent organisation.

  4. It would surprise me greatly if the majority of IFAs have not been involved with cases with the FOS where the final decision is not the one expected. There remains a massive bias towards the claimant and modern day standards are still being applied to advice that was given in the 80s when the standards adhered to were so much lower.

  5. Address the letter to Mark Hoban MP, Room 101, marked priority shredder.

  6. Also needed is a corresponding set of proposals to rein in the complete lack of accountability of the FSA/FCA, number one of which should be forcing it to adhere to the spirit and to the letter of the Statutory Code of Practice for Regulators. The law is already there. It needs to be enforced.

    And if the FOS is so confident that everything it does is underpinned by the Law, then the Law needs to be changed.

    One hopes the TSC has been sent a copy of this letter though, in view of the TSC’s lack of any real powers, whether or not that’s likely to do any good is another matter.

  7. Alan Lakey is quite correct,

    I recently saw a letter were a an individual had written to FOS surrounding specific advice from an IFA.

    The Ombudsman quite correctly dismissed the original allegation and found for the IFA.

    However in the very same letter went on to proclaim that the investigator had managed to unearth a completely different issue from the one initially raised, had found in favour of the “claimant” (who at this stage hand’nt even complained about this matter) and awarded £32,000 against the advisor ???.

    If thats not a “consumer champion” then what is?

  8. If this is a sign of Otto Thoresen’s influence at the ABI then that is a welcome activity.

  9. consideration should also be given to the fact that FOS has been making decisions based on kangaroo court for years and IFA’s had to pay price for it. Staff at FOS never understood the workings in finance and were only motivated to prove misselling by ignoring all evidence presented. All the wrong decisions should be reviewed and IFA’s reimbursed with compensation paid.

  10. Incompetent Regulators Awards Team 21st April 2011 at 5:13 pm

    FOS ignores fraud, pays bonuses to speed up for tejh processing of cases, uses under-qualfied adjudicators/ombudsmen, make the rules up as they go along, ignore FSA rules, ignore the law, make judgement more often not backed up with no evidence, charge fees for complaint cases regardless, are unaccountable to anyone (even the FSA rules). This all spells disaster.

  11. The complainant should end up paying fees in certain (not all) circumstances when the complaint is lost. It isn’t right that the complainant has nothing to lose in all cases.

    And it’s not right that FOS can’t be challenged in the Courts.

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