Love them or hate them, the Financial Ombudsman Service (FOS) offers a valuable alternative to litigation when it comes to resolving disputes.

    When faced with a complaint, avoiding the major cost implications and unlimited awards of damages that come with court proceedings is a major benefit.

    For over a decade I’ve been dealing purely with financial disputes, acting for both individuals and businesses, and often things have been resolved through the FOS. But how might the Consumer Duty affect complaints – will there be a flood of criticisms about firms failing to comply? Let’s take a look.

    Will more complaints be upheld?

    The FOS believes that, towards the end of this year, more complaints will involve breaches of the Consumer Duty, but they’re not expecting a significant rise in the number of new complaints that wouldn’t otherwise be made. Do I agree? Partly. 

    It’s difficult to think of circumstances where a firm could breach the Consumer Duty without also breaching other rules and principles, so any complaints being made now will likely feature Consumer Duty, but in addition to accusations of failing to meet pre-existing obligations. As opposed to how many, the more pertinent question may therefore be, will more complaints be upheld?

    Logically, complaints will be strengthened and perhaps more likely to succeed as a result of the addition of Consumer Duty failings. So while overall complaint numbers might not rise ‘significantly’, we could see more complaints being successful.

    As for new complaints arising out of the Consumer Duty, I think achieving good outcomes in relation to price and value is likely to provide the most fertile ground for additional complaints, thereby increasing overall volumes of complaints. Whether this will be ‘significant’ or not will only be known in time, but I suspect it could be. In the words of Oscar Wilde “Nowadays people know the price of everything and the value of nothing.”

    Fair price and value

    Views on what fair price and value is can differ, wildly, between firms and consumers and I suspect that some claims management companies have been busy preparing adverts to catch the attention of anyone who thinks they’re being overcharged or didn’t get a ‘good outcome’.

    While the FCA and FOS are alive to vexatious complaints and opportunism on the part of claims management companies, it will be hard to know where that line is to be drawn initially.  

    Price and value is going to be a difficult area for firms to navigate until there is either more prescriptive guidance, or some decisions on the matter are published by the FCA or FOS. In terms of avoiding complaints, firms might consider having well-reasoned internal pricing frameworks and keeping clear records in relation to their rationale for levels of pricing, and evidence that these have been discussed with consumers.

    Use of products

    The FOS is anticipating more complaints about the ‘use’ of products and services where consumers consider that firms should have done more to check that they were using the product or service as intended, but no examples were given.

    It may be that, in light of the cross-cutting rule to “support retail customers to pursue their financial objectives” and the ‘consumer support’ outcome, the FOS expects to see more complaints where there is perceived ‘selling’ but nothing meaningful beyond that. For example, perhaps an investment bond sold where the adviser fails to talk to their client about taking the 5% tax-deferred sum at reviews to ensure that the client is taking advantage of the product’s benefits over time. 

    Overall, I think that complaints could rise, but not in relation to all firms. Many firms already put their clients’ interests, and achieving good outcomes for them, at the heart of what they do. 

    Next time I’ll look at what else has changed over the past 10 years in terms of complaints to the FOS...

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