26 Feb Jencap Law Update Key powers the Financial Ombudsman Service holds and what to expect when working with them
Jencap Law Update
Tasked with resolving disputes between consumers and financial businesses, the Financial Ombudsman Service (FOS) ensures fairness and transparency within the financial sector.
Since its inception in 2001, the FOS has handled millions of complaints, providing consumers with a vital avenue for resolving disputes and holding financial businesses accountable.
To deal effectively with the FOS, read on to understand how the Ombudsman thinks, the power it holds, and what you can expect in dealings.
The Financial Ombudsman Service makes its decisions on what it considers fair and reasonable
Because it doesn’t follow the same strict parameters a court must adhere to when considering its decision, the FOS enjoys considerable freedom in its approach.
The FOS makes its decisions on what it considers fair and reasonable in the circumstances, determining the outcome of the complaint “with reference to what is, in the opinion of the ombudsman, fair and reasonable in all the circumstances of the case”.
This principle forms the foundation of the entire decision-making process of the FOS.
In short, the FOS considers relevant laws and regulations, regulators’ rules, guidance and standards, codes of practice, and, where appropriate, good industry practice at the relevant time. It reaches its decisions based on a thorough review of all evidence from both the firm and the consumer.
The Financial Ombudsman Service operates with inquisitorial powers
Unlike the adversarial system used in UK courts, where the judge acts as a neutral arbiter between the claimant and the respondent and each party is responsible for presenting their own cases, the FOS actively investigates complaints.
As a result, the FOS can look at any aspect of the complainants dealings with the firm and take the complaint in any direction – a power the FOS is very happy to deploy, often at the cost of the firm.
Specific guidelines for handling evidence in dispute resolution
The FOS has the authority to stipulate what evidence is required, allowing the Ombudsman to determine what evidence is necessary to resolve a complaint. It can exclude evidence that may have been admissible in a court of law, as well as include evidence that would not be admissible in a court.
The FOS can demand a party to provide evidence. If a party fails to comply with its request, the FOS can seek an order from the court to compel the party to produce the documents.
It can also decide the extent to which evidence should be oral or written, and the manner in which it should be presented. This ensures that the evidence is presented in a way that is most useful for resolving the dispute. And almost always means no hearing is granted – even when a firm requests an oral hearing.
This degree of flexibility allows the Ombudsman to consider a broader range of information when making a decision.
Initially, the FOS will typically request the client file and a copy of the final response.
We always recommend that the firm provides a summary of the complaint and the final response highlighting the pertinent issues, and that the client file is ordered in reverse chronology – starting from final response to suitability report and so on.
This helps the investigating case officer, frames the firm’s position in a logical way, and guides the investigation to a fair and informed decision.
Financial Ombudsman Service awards and limits
The FOS has specific limits on the amount of compensation it can award. These vary depending on when the complaint was referred to the FOS and the date of the act or omission by the firm.
For acts or omissions by firms after 1 April 2019:
| Date referred to the FOS | Compensation limit |
| After 1 April 2024 | £430,000 |
| 1 April 2023 – 31 March 2024 | £415,000 |
| 1 April 2022 – 31 March 2023 | £375,000 |
| 1 April 2020 – 31 March 2022 | £355,000 |
| 1 April 2019 – 31 March 2020 | £350,000 |
For acts or omissions by firms before 1 April 2019:
| Date referred to the FOS | Compensation limit |
| After 1 April 2024 | £195,000 |
| 1 April 2023 – 31 March 2024 | £190,000 |
| 1 April 2022 – 31 March 2023 | £170,000 |
Limits are adjusted annually in line with inflation, as measured by the Consumer Prices Index (CPI).
The FOS can also recommend that firms pay more than these limits if it believes it is fair, but it cannot enforce payments beyond the set limits.
As well as compensation for financial loss, the FOS has the authority to make various types of awards to ensure fair compensation for complainants. It can award a sum of money as compensation for pain and suffering, reputational damage, and distress or inconvenience.
The amount awarded is based on what the FOS considers fair and typically falls within the following limits:
- Up to £500: For cases involving minor distress or inconvenience, such as a short delay or a minor error.
- £500 to £1,500: For cases where the distress or inconvenience has had a more significant impact, such as causing some disruption to daily life or requiring additional effort to resolve.
- £1,500 to £3,000: For cases where the distress or inconvenience has had a substantial impact, such as causing considerable disruption to daily life or significant emotional distress.
- Over £3,000: For the most serious cases where the distress or inconvenience has had a severe impact, such as causing major disruption to daily life typically lasting more than a year.
Awards may also be made to cover interest and costs. In some circumstances, the FOS may issue directions to the firm to take specific actions – correcting a mistake, providing a service, or taking steps to prevent similar issues in the future.
With so much at stake – reputational damage, financial costs, and disruption to your business – when dealing with the FOS, it pays to seek expert support.
Get in touch
At Jencap Law, we have first-hand experience of dealing with the FOS and are here to help you navigate and defend complex complaints.
If you’d like to learn more about the work we do, we’d be delighted to answer your questions.
Email mail@jencap.law, book a short call by completing our online form, or call 029 2000 2325.