Lawyers and CMCs face £250 fee to complain to Financial Ombudsman

Manzoor: Lawyers and CMC often increase FOS’s costs

Lawyers and claims management companies (CMCs) making volume complaints to the Financial Ombudsman Service (FOS) on behalf of clients will be charged £250 per case, it has proposed.

Representatives will be refunded £175 should their complaint succeed, while the first three complaints brought each year will be free.

The move follows a Treasury consultation last December which said: “The government has heard concerns that CMCs and other relevant legal professionals are able to ‘weaponise’ case fees charged by the FOS to pressure firms into settling claims before they formally become part of the FOS process.”

Despite “strong opposition” from lawyers and CMCs, the proposal was supported by others, FOS reported in a fresh consultation on how the new regime would work.

It said that around 20% of the 400,000 cases referred to the service in the past two years were brought by lawyers and CMCs but only 22% were upheld, compared to a service-wide average of 32% – the opposite of what FOS said should be the case.

At the moment, FOS only charges a fee of £650 per case – recently reduced from £750 – to respondents, irrespective of whether the complaints is upheld, which it said meant there was “little incentive” for lawyers and CMCs to sift cases properly.

In her introduction to the consultation, FOS chair Baroness Manzoor – once the Legal Services Ombudsman – said: “This means CMCs and other professional representatives bear very limited financial risk – even though such representatives often increase our costs by, for example, disproportionate referrals of cases without merit, failure to provide full case details, or by making unnecessary escalations to an ombudsman for a final decision when our approach to the issue is already well established.”

The consultation said respondents reported the “significant impact” of such complaints were having on them too: “This behaviour is therefore bringing the complaints arrangement into disrepute.”

The objective of the new fee was to allocate “an element of the costs of resolving cases to CMCs and other professional representatives who can derive benefit from our service”.

Giving three free cases meant a law firm or CMC could test FOS’s approach on new or novel complaint issues, however.

An analysis showed that almost 80% of lawyers and 55% of CMCs that referred cases to FOS did so less than three times a year; out of the 213 CMCs in 2022/23 and 177 CMCs in 2023/24 that referred cases, the majority of referrals came from fewer than ten of them.

FOS said: “We believe that keeping 100% of any redress awarded is a good outcome for consumers.

“Our service aligns with the views of the Financial Conduct Authority (FCA) and Solicitors Regulation Authority (SRA) in recognising that CMCs and legal professionals acting as professional representatives can sometimes benefit both the individual consumer and wider society, by using their expertise to help resolve disputes.

“We are also in agreement with these regulators that, in the majority of cases, it is not necessary for complainants to use CMCs or other professional representatives when referring cases to us.”

The consultation said FOS was working with the SRA to ensure the case fee was included in the cap it has proposed on the amount solicitors can charge clients for financial mis-selling claims. There is already a cap for CMCs.

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