Complaints: Why the role of the FOS is so important for your firm and your clients

When responding to a complaint, no matter how well you write your final response letter, if you reject a complaint, some clients will want to exercise their right to refer the complaint to the Financial Ombudsman Service (FOS).  The FOS provides an informal dispute resolution service that is free for clients to use. 

The FOS is funded by the industry and in this article  I explore the role, functions, and significance of the FOS, providing an understanding of its impact on consumers and the financial services industry.

What is the Financial Ombudsman Service?

The FOS is an independent body established to resolve disputes between consumers and financial businesses in the UK.  It was created under the Financial Services and Markets Act 2000 and has been operational since 2001.  The FOS handles complaints about a wide range of financial services, including banking, insurance, investments, and mortgages.

The role and functions of the FOS

The primary role of the FOS is to provide a free, fair, and unbiased resolution service for financial disputes.  Here is a breakdown of its key functions:

1. Handling complaints: the FOS deals with complaints from consumers about financial products and services.  This includes issues like mis-sold financial products, unfair charges, poor customer service, and disputes over transactions.

2. Investigating disputes: when the FOS receives a complaint it investigates the issue thoroughly.  This involves gathering information from both the consumer and the business, examining relevant documents, and considering industry regulations and standards.

3. Making decisions: after the investigation, the FOS makes a decision based on what is fair and reasonable in the circumstances.  If the complaint is upheld, the FOS can instruct the business to take corrective actions, such as paying redress or rectifying the issue in some other way.

4. Providing guidance: The FOS also provides guidance to both consumers and businesses to help prevent future disputes.  This includes publishing decisions and case studies, which offer insights into how similar cases have been resolved.

The complaint process

The process of referring a complaint with the FOS is straightforward:

1.   Initial complaint to the business: before approaching the FOS, consumers must first try to resolve the issue directly with the business itself.  The business has eight weeks to respond.

2.   Contacting the FOS: if the consumer is not satisfied with the business’s response, they can escalate the complaint to the FOS.  This must be done within six months of receiving the business’s final response.

3.   Investigation: once the FOS receives the complaint, it will assess whether it falls within its jurisdiction and, if so, begin the investigation process.  The FOS aims to resolve most cases within six to nine months, though complex cases may take longer.  The FOS investigator will communicate their findings to both the consumer and the firm

4.   Referral to an Ombudsman:. if either party is unhappy with the outcome from the investigator, the case will be referred to an Ombudsman who will investigate the complaint independently.

5.   The Ombudsman’s decision is final: the Ombudsman will communicate their decision to the firm and the consumer.  If the consumer accepts the decision and the firm is obliged to calculate the redress this must be carried out promptly and paid to the consumer.  The case is then closed.

The Impact of the FOS

The Financial Ombudsman Service plays a crucial role in protecting consumers and maintaining trust in the financial system.  Some of its significant impacts include:

1. Consumer Protection: by providing an avenue for informal dispute resolution, the FOS ensures that consumers have a voice and can seek an independent review when not satisfied with the way a financial business has dealt with a complaint.

2. Industry Standards: the decisions and guidelines issued by the FOS help shape industry practices, encouraging financial businesses to adhere to higher standards of fairness and transparency.

3. Confidence in Financial Services: the presence of an effective informal dispute resolution mechanism boosts consumer confidence in financial services, knowing that they have recourse if things go wrong.

Conclusion

The Financial Ombudsman Service is a cornerstone of consumer protection in the UK’s financial services sector.  It provides a vital service in resolving disputes, ensuring fairness, and enhancing the overall integrity of financial services.  Whether you are a consumer facing an issue with a financial product or a business striving to improve customer relations, understanding the role and functions of the FOS can be invaluable.

How can we help

It is important that you have robust policies and procedures to address complaints should you receive them.  If you would like Compliance Matters UK Limited to review your compliance systems and controls schedule a free, no-obligation consultancy call with us today. 

To learn more about how Compliance Matters UK Limited can support your firm, click here. 

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