Claims management companies (CMCs) could be hit with new fees of up to £250 to lodge a case, according to proposals from the financial ombudsman aimed at making costs fairer. The Financial Ombudsman Service (FOS), which settles disputes between consumers and financial firms, stated that the fee would be slashed to £75 if the case outcome favours the consumer.
The service will continue to be free for individuals who bring their case directly to the service, as well as for families, friends, charities, and voluntary organisations assisting them, the ombudsman confirmed. These proposed new case fees are part of a consultation open until July 4.
Currently, businesses responding to a complaint pay £650 per case. The ombudsman is aiming to make its fee model fairer by recovering some of its costs from CMCs and representatives, as well as financial services firms.
Like financial services firms, all professional representatives will be allowed three free cases a year; beyond that, they will be charged the £250 fee, reduced to £75 if the consumer’s complaint is upheld, the service announced. Under these proposals, if the service does not uphold the complaint, the higher fee collected will be used to reduce the fee for the financial business against whom the complaint was initially raised.
James Dipple-Johnstone, the deputy chief ombudsman at the Financial Ombudsman Service (FOS), has made it clear that changes are afoot, stating: “We are committed to improving our service so it is as easy to use and accessible as possible, while ensuring it remains free for all consumers and that those with upheld complaints can keep all of any award we make.”
He also highlighted the role of professional representatives in financial disputes: “Professional representatives can play an important role in resolving financial disputes. However, they gain financially from our service without contributing to the running costs, and with little incentive to ensure that claims they advance have merit.”
Dipple-Johnstone further explained the rationale behind the proposed fee changes: “The new proposed charges are important to ensure we cover the costs associated with helping resolve disputes and we feel reflect a fairer allocation of those costs.”
He also extended an invitation for feedback: “We welcome all views on our proposed fee changes.”
In a move to revamp the fee-charging framework of the ombudsman service, the Government has initiated the process under the Financial Services and Markets Act 2023.
It’s worth noting that Claims Management Companies (CMCs) often take a portion of any compensation awarded, whereas consumers retain the entire amount of any redress when they approach the ombudsman directly.
The FOS reported that over the last two years, one in five (20%) of the cases referred to them were brought by professional representatives.
Out of these cases, less than a quarter resulted in a different outcome for the complainant compared to what the responding firm had already offered, according to the ombudsman’s findings.
