What role does the FOS play?
The Financial Ombudsman Service (FOS) is an important service, providing free access to justice for customers with disputes concerning financial services. It offers a speedy alternative to court and can benefit the financial services industry by reducing time-consuming and costly litigation. Given its integral role, it is vital for both consumers and financial services firms that the FOS functions properly and fairly – and is seen to do so.
The allegations against the FOS
Earlier this year, Channel 4 aired its Dispatches programme making allegations against the FOS of:
- poor service
- institutional bias against consumers within the FOS.
In response, the FOS quickly commissioned an independent report of its services and the results of this review were published on 12 July 2018.
The independent review
The main conclusion was that the FOS was providing an “effective service” and there was “no evidence of institutional bias”. The report, however, did highlight a number of areas for improvement, including recommendations that the FOS:
- improve staff training, policies, and procedures
- invest in IT systems (including consumer-facing solutions and data analysis)
- improve the clarity of consumer communications
- consider (in conjunction with the FCA) a consultation for a new levy funding structure to meet the need for this investment.
The FOS is yet to comment on any specific planned improvements in response, but have committed to publishing an update before the end of the year.
Why this matters
The sections of the report that will be of most interest to financial services firms concern the allegations of institutional bias.
- By design, parts of the FOS system are inherently consumer-friendly; for example, decisions are only final and binding on businesses, whereas consumers have the option to take the matter to court.
- Many regulated firms also consider that FOS adjudicators give preference to consumers over big institutions.
- However, this consumer-focus is often seen as a good thing: it boosts consumer confidence in the financial services sector and helps reduce costly litigation.
Allegations of bias in favour of institutions that undermine consumer willingness to use the FOS should be of concern to everyone who works in financial services and therefore the finding of no institutional bias either way should be welcomed by all.
A copy of the Report of the Independent Review of the Financial Ombudsman Service – July 2018 (PDF) can be viewed on the FOS website