Call to charge lawyers £450 to make complaint to FOS

Harrington: Greater equality needed

A trade association for financial advisers has called on the Financial Ombudsman Service (FOS) to impose charges of £450 per case on law firms and claims management companies (CMCs) making volume complaints on behalf of their clients.

Simon Harrington, head of public affairs at the Personal Investment Management & Financial Advice Association (PIMFA), said the fee would act “as a real disincentive for firms minded to bring forward frivolous complaints”.

Despite strong opposition to the idea in a previous consultation from both lawyers and CMCs, FOS proposed charging them £250 per case in a consultation launched in May this year. However, £175 would be refunded if the complaint was successful, while the first three complaints each year would be free.

At the moment, FOS only charges a fee of £650 per case to respondents, irrespective of whether the complaints is upheld.

Responding to the consultation, Mr Harrington said that while imposing a fee was a “welcome disincentive”, PIMFA was disappointed it had been set at what he described as a “reasonably low” level.

This would “likely have little impact on the willingness of CMCs in particular to target firms and pressure them into settling cases regardless of their merits before cases are even brought forward to you”.

Mr Harrington said processing complaints and determining the correct course of action for firms and the consumer was “extremely labour intensive” for member firms.

His members wanted the case fee to be higher “to better reflect the principle of equality between the two major parties principally involved in any case resolution – the respondent firm and the CMC”.

Levying a higher case fee more aligned to the £650 required of respondent firms “would represent a fairer outcome and better reflect the role of both parties in responding to a claim made on behalf of the consumer”.

If FOS equalised the cost of cases brought forward by CMCs or lawyers with a 50-50 split, assuming the total cost of the bringing a case would remain at £900, law firms and CMCs would be required to pay a cost of £450 each.

“This would, in our view, better reflect the principle of equality between respondent firms and those that bring claims forward.

“Additionally, the prospect of potentially bearing a £450 cost would likely act as a real disincentive for firms minded to bring forward frivolous complaints.”

Mr Harrington said the association believed the presence of a CMC offered “marginal value” to the consumer.

“This analysis is broadly in line with research previously conducted by the [Financial Conduct Authority] which showed that consumers tended to over-value the service that CMCs provide as well as misjudging the options available to them when making a claim.”

Mr Harrington said FOS’s own data suggested that support from a lawyer or CMC did not achieve outcomes which were “substantially different” from consumers who did not use them.

PIMFA therefore questioned “the logic behind levying a substantially different fee between respondent firms and CMCs or professional representatives given that they are able to extract maximum value from case settlements relative to questionable or more likely, minimal, input of value”.

Mr Harrington added that the association was unconvinced by the argument that raising the case fee for CMCs and law firms in the way proposed would lead to consumer detriment.

“PIMFA remain steadfast in our view that access to the FOS should remain free for consumers and do not consider consumers having to use the FOS directly in the vast majority of cases to represent a poor outcome for them.”

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