What is Financial Ombudsman Service?

When you take out a mortgage, take out a loan or buy lifeinsurance, you expect the quality of the service you receive to be high and the whole relationship with the finance company to run smoothly. However, things may go wrong - the advice you are given may lead you to make the wrong decision and the content of the advertising leaflet may not reflect reality. Fortunately, you are not alone in these situations - the Financial Ombudsman Service can help you resolve some disputes.

What services the Financial Ombudsman Service provides?

The Financial Ombudsman Service resolves disputes between consumers and banks, insurance companies, creditors and lenders, pension, investment and savings funds, pawnbrokers, financial and credit advisers, brokers and credit card issuers.

How does the Financial Ombudsman Service work?

The FOS is an appeal body. This means that in order to apply to this authority for assistance, you must first complain directly to the service provider. The company serving you has 8 weeks to process your request. If this is not done or you are not satisfied with the turn of events, you are entitled to recourse to the authority.

Based on the Ombudsman Service’s decision, your service provider will be obliged to pay you financial compensation, correct your credit report or make an apology.

Why use the Financial Ombudsman Service?

UK financial law is particularly protective of consumers - regulations are structured to protect you from possible fraud and bad faith on the other side of the transaction. Regulations such as Consumer Duty and the FCA (Financial Conduct Authority) guidelines are structured to ensure the maximum level of fairness in the actions of service providers.

While the courts are primarily guided by whether the trader in question has acted in accordance with the law, the Financial Ombudsman Service also considers specific behaviour from an ethical point of view. In practice, conduct ‘on the edge of the law’ can therefore be penalised.

However, It ought to be mentioned that filing a complaint with the FOS does not guarantee a decision that works in your favour - on average 37% of all applications are granted. The body is by definition impartial and the assessment criteria are always objective. However, it happens that one of the parties to the conflict, usually the bank, appeals the Ombudsman’s decision, taking the case to court. This is a final legal path that generates high costs and there is a much longer wait for resolution. In practice, therefore, decisions issued by the Financial Ombudsman Service end disputes between financial companies and consumers.

What abuses can be reported to the Financial Ombudsman Service?

For all intents and purposes, you are entitled to claim whenever a financial services provider does something that you believe is contrary to UK law or your contract. In practice, the most common things challenged are:

• Bank account fees

• Frauds and bank account hacking

• Sudden and unjustified changes to fee and commission tables

• Disguised commissions and fees

• Overly aggressive methods of debt recovery

• Unfairly managed investments

• Misleading advice from financial and credit advisers

Remember, the ombudsman won’t help you if your mortgage instalments go up as a result of rising interest rates or if your investments don’t make money - only behaviour that directly results from abuse by a financial institution is penalised.

What if a mortgage broker engages in misconduct ?

In the seven years that Extend Finance has been in business, we have never had a situation where it was a customer who was dissatisfied with the level of service. In fact, this is standard in our industry - according to FOS statistics, only 5% of complaints made against mortgage brokers were resolved positively.

However, if you feel that the offer or sales service presented to you has infringed your interests, you can use the following procedure:

• Make a complaint to the company serving you - pass on the information by email or letter. Financial service providers have 8 weeks to respond to you.

• Contact the Financial Ombudsman Service - if you are unhappy with the response of the company you are a customer of, you have the right to complain within 6 months of receiving a response. Attach a copy of previous letters and communications to your request. You can find template applications here.

• Await a response from the office - usually, the Financial Ombudsman Service takes no less than 3 months to review the case and issue a decision.

The vast majority of disputes are resolved at the first stage - it is in the interest of financial institutions to close these types of cases as quickly as possible, so if a mistake has indeed been made, it is often more cost-effective to reach a settlement with the customer.

What amount may I receive?

The limits on the amounts are very high - for cases reported to the office after 1 April 2024, the amount of compensation can be as high as £430,000. The amount of compensation will be equal to the amount of real losses suffered by the victim and, if it is not possible to estimate them, the Financial Ombudsman Service will determine the fair compensation based on past cases.

In addition to the indemnity payment, interest of 8% per annum is sometimes added. In practice, these are to compensate for inflation as well as the lack of access to one’s own funds.

Compensation can be paid to cover material losses (excessive fees, confiscation of assets) as well as moral losses (distress or inconvenience). As a general rule, however, compensation is not intended to be a source of income - its purpose is to compensate you for the losses and damages caused to you by the wrongful actions of a financial industry entity.