What is the Financial Ombudsman Service (FOS)?

The FOS: What is it?

The Financial Ombudsman Service (FOS) is a free, independent service that helps settle disputes and complaints between consumers and financial service businesses in the UK. If a consumer has an issue they can’t resolve with a business such as a bank, building society, or insurance company, the FOS reviews the issue and makes a fair and reasonable decision to resolve it.

Common Types of Complaints Handled

The FOS deals with a wide range of complaints about most kinds of financial products and services provided in the UK. These include complaints concerning insurance, banks and banking services, fraud and scams, mortgages, loans, investments, pensions, payment protection insurance (PPI), and many more.

However, the FOS cannot handle complaints that should have been dealt with within an expired timeframe, have already been dealt with by the court, or concern non-UK businesses. Customers are encouraged to take up their complaints directly with the business as a first step. The FOS can offer advice to the business to ensure the matter is dealt with quickly. If this route does not resolve the issue, customers are then advised to approach the FOS.

How Many Complaints Does the FOS Handle?

Half-yearly data supplied by the FOS at the end of 2023 showed that almost 100,000 complaints were received and handled between 1 July and 31 December. This is a significant increase of 20% compared to the previous year’s figures, with notable increases in travel insurance and banking complaints.

How Does the FOS Make Decisions?

When a customer calls the FOS to raise a complaint, they are assigned a case handler. The case handler collects all necessary information from the caller and then asks the business for their side of the story. They fairly weigh up the facts and provide both parties with an ‘initial assessment’. This often involves declaring that there has been a misunderstanding and suggesting how things should be put right. For example, if an insurance company has unfairly canceled a policy, the FOS might tell them to reinstate it. In other instances, the FOS might deem that the customer has lost out financially or experienced distress or inconvenience due to the business’s actions and ask the business to pay compensation.

In most cases, this is the end of the matter. However, if either party disagrees with the outcome of the ‘initial assessment’, it is escalated to a ‘request’ for a formal and final decision from an Ombudsman’. The Ombudsman reassesses all the details relating to the complaint, considers any final comments from both parties, and produces a final decision. The customer must then decide whether to accept or reject the decision. If they accept it, the business must follow the Ombudsman’s instructions to put things right. If rejected, the involvement from the FOS ends, allowing the customer to pursue legal action independently.

How Does the FOS Support Businesses?

It’s important to note that the FOS does not work solely in the interest of the consumer. As well as resolving disputes for consumers, they are equally dedicated to supporting financial service businesses.

The FOS provides a step-by-step guide for businesses to handle direct complaints. Additionally, it engages with businesses of all sizes to gain insight into how complaints arise and offer advice on how they might be avoided in the future. Part of this process involves sharing regular data, including quarterly data on the financial products and services customers have contacted the FOS about, half-yearly data showing the number of cases handled and their outcomes, and annual data showing the overall volume of complaints received and resolved and the names of the financial products and services involved. By sharing this data, businesses can recognise key trends in complaints and gain insight into what to look out for.

Are FOS Services Free for Businesses Too?

While the FOS is free to consumers and small businesses, larger financial businesses meet the costs of resolving complaints. Financial businesses covered by the FOS and regulated by the FCA pay an annual levy to contribute to the FOS costs. In addition to this, they pay an individual fee on a case-by-case basis. At the time of writing this article, the first three cases in each financial year against a business are free, and from the fourth complaint onward, a charge of £650 per case is issued. It is important to note that case fees are not charged until a complaint is resolved, and most businesses have very few cases referred to the FOS and thus do not pay any case fees at all.

Which Other Organisations Does the FOS Work With?

The FOS is a public body set up by Parliament, making it very transparent about who it works with. An important relationship is sharing knowledge, experience, and information with HM Treasury and various members of Parliament.

The FOS works closely with the Financial Conduct Authority (FCA) in governance, responding to regulations, and sharing information. Although closely linked, the FOS remains independent in how it investigates and concludes individual cases.

In addition, the FOS conducts regular meetings with various consumer groups and charities in a bid to raise awareness of their service, share insights on emerging issues and complaint trends, share the latest complaint handling procedures, and improve awareness of the wider scope of issues customers are currently experiencing with financial business services.