A broker has told Mortgage Strategy that the Financial Ombudsman Service (FOS) intends to twice charge him £750 for investigations into complaints that weren’t upheld.
Brian Rix, of Rix Financial Services, says these are the first complaints he’s received in 30 years. The first concerns an interest-only mortgage sold 13 years ago. The second relates to a boyfriend’s objection that Rix had informed the girlfriend in the couple of how much money was outstanding on their mortgage, at her request.
“I did not provide any advice nor arrange anything. I just provided accurate, truthful figures to a client. The male client made a complaint to Sesame because he had been caught out and as a result had ‘been financially disadvantaged’,” says Rix.
The FOS consultation provides those closely interested in our work, and those who pay directly for it, with the opportunity to feed back
The first case was taken to the broker’s network, Sesame, and rejected. Both cases were then taken to the FOS — the first by a firm called Quanta Law and the second by the complainant himself — and rejected again, with the first case being looked at once more following an appeal.
Like many networks, Sesame is permitted three ‘free’ complaints a year, which are shared across its entire pool of more than 700 brokers. Once the network has exceeded its allocation of free complaints, the charge for opening the case is passed directly to the broker.
Rix says: “I believe it is unjust to charge an adviser £750 for a complaint that is not upheld.
“Frivolous, baseless and out-of-date cases… should be excluded from such penalty as no investigation is required.”
If claims companies had to shoulder some of the cost when complaints were not upheld, it would perhaps bring an end to ‘See what sticks’ tactics.
The situation has not been ignored by Sesame. Chief operating officer Richard Howells says the network sympathises with brokers “forced to pay for the FOS to investigate complaints when they haven’t done anything wrong”.
He adds: “The FOS has a vital role to play in our industry — and we certainly would not want to put barriers in the way of customers who have legitimate complaints — but the current system feels unfair on good, hard-working advisers, and we feel something needs to be done about it.”
Howells argues that, while it is “absolutely right” that an adviser should pay the £750 investigation fee if a complaint is upheld against them, “it is not fair that advisers foot the bill for every case, even when they have done nothing wrong and the complaint is not upheld”.
I feel more can be done to root out and dismiss frivolous complaints earlier in the process — perhaps by introducing a ‘triage stage’
He continues: “While we believe ‘polluter pays’ continues to be the right approach to fund the FOS, we feel there is a way forward that is both fair and proportionate to advisers while respecting a customer’s right to complain.
“Most of the time these cases are from claims management companies, pushing speculative complaints that have little chance of success. The regulation of claims management companies has helped but, if they had to shoulder some of the cost when complaints were not upheld, it would perhaps bring an end to ‘See what sticks’ tactics.”
The Association of Mortgage Intermediaries (Ami) has also taken an interest in the situation.
The current system feels unfair on good, hard-working advisers, and we feel something needs to be done about it
Chief executive Robert Sinclair says that, while Ami recognises the importance of the FOS, “it’s important the funding of the service — paid by fee-paying firms — is based on a ‘polluter pays’ model, with those firms using the service heavily and seeing complaints upheld contributing more. We do not believe the current funding model achieves this aim.”
Sinclair adds: “Too often, good firms end up defending their good name on cases that have very little chance of success.
“Ami has the opportunity to share its views on the FOS’s future funding model in a consultation due in June, and has already had early engagement with the FOS to share our thoughts on potential solutions. Ensuring claims management companies only pursue plausible matters will be central.”
A FOS spokesperson replies: “When the FOS was established, parliament decided that access to a free, independent dispute resolution service was essential for public confidence in financial services.
Too often, good firms end up defending their good name on cases that have very little chance of success
“Businesses, not their customers, should meet the costs of resolving complaints.
“All financial businesses that are covered by our service and are regulated by the FCA pay an annual levy to contribute to our costs.
“Each year, we consult publicly on our proposed plans and budget for the financial year ahead.
“The consultation provides those closely interested in our work, and those who pay directly for it, with the opportunity to feed back on how we deliver and fund our service.
“It is part of our wider engagement with our stakeholders around our plans and priorities.”
Businesses, not their customers, should meet the costs of resolving complaints
Meanwhile, a Quanta Law spokesperson says: “The complaints that we represent in respect of missold mortgages are brought on behalf of financially vulnerable consumers who were advised to enter into unsuitable mortgages.
“Quanta Law is a firm of solicitors, not a claims management company. Before we present a complaint to a mortgage broker, we carry out a thorough investigation, including analysing alternative mortgage products that were available at the time of the advice.
“We also take a witness statement from the complainant to ascertain their recollection of the advice provided. For context, approximately 98% of the enquiries we receive from consumers do not pass our assessments, and result in no complaint being presented.
“The ombudsman has rejected the complaints on the basis of limitation and importantly not on the merits of the complaint itself. The decision regarding limitation is inconsistent with other ombudsman decisions and we are now preparing to take forward legal action in this regard.
Frivolous, baseless and out-of-date cases… should be excluded from such penalty as no investigation is required
“Quanta Law prides itself on being a beacon of hope for missold consumers and we are pleased to have provided justice to countless victims [of] financial misselling.”
While the FOS has not yet charged Rix, he concludes: “I feel more can be done to root out and dismiss frivolous complaints earlier in the process — perhaps by introducing a ‘triage stage’ — so that advisers don’t have to incur a £750 charge in every instance.”