A huge banking change came into effect this month, and it could end up costing savers more when they file a complaint. The Financial Ombudsman Service (FOS) – which settles disputes between UK-regulated financial companies and consumers – started charging for third-party claims on April 1 this year.
The new charges have been placed on third-party claims firms who pass complaints to the FOS on behalf of consumers. If you use a regulated financial services company such as a bank, pension provider or investment firm, you can make a complaint about them to the FOS if you can’t resolve it with them directly.
The FOS then looks at both sides and if it upholds your complaint, it will set out what the firm must do to put it right. You can submit claims for free yourself, however, there are companies that will help you submit your case, and these firms then take a cut of the compensation you could be paid.
This is currently capped at 30% of the payout for firms regulated by the Financial Conduct Authority (FCA). However, some firms are not covered by this and can charge much higher fees.
According to data from the FOS, between April and December 2024, professional representatives were behind almost half (47%) of the cases sent to the FOS. Yet only around a quarter (26%) of cases brought by these representatives were successful, compared to over a third (38%) of those brought directly by consumers.
The Ombudsman believed that claim firms were being financially incentivised to submit complaints that had no real basis, as they faced no penalties for unsuccessful cases. On the other end, financial firms pay a £650 fee for every complaint case launched against them.
The FOS said the new charges would make its funding arrangements “fairer” and incentivise claims firms to “submit better-evidenced complaints.”
From 1 April 2025, professional representatives are limited to 10 free cases each financial year. After that, they’ll be charged £250 for every case they take to the FOS. However, if the complaint is successful, they’ll get back £175 in credit, which effectively reduces the charge to £75.
Charities, family members, and friends helping you file a complaint to the FOS will still be able to do this for free, as they’ll be excluded from the charges.
Under the new rules, financial services providers will also get a discount on case fees paid to the FOS if a complaint brought against them by a claims firm subsequently fails. Instead of the previous charge of £650, they will instead be charged a discounted rate of £475.
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In an announcement, the FOS explained: “A large proportion of complaints referred to us in recent years have been driven by professional representatives who either charge consumers or take a percentage of any redress awarded.
“Currently, financial service firms pay a £650 case fee for complaints against them that we investigate, while professional representatives do not pay a case fee.
“Under the new rules, if a complaint referred by a professional representative is not upheld or is withdrawn, the financial business against whom the complaint was made will pay a reduced case fee of £475, instead of £650.
“The move aims to make the funding arrangements for us fairer and to encourage professional representatives to submit better-evidenced complaints, considering their merits more diligently before referring them.”
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While the financial industry and consumer experts have welcomed the news, concerns have been raised that this fee could be passed down to consumers who use claims these third party firms. Experts have warned that the plans could end up “pricing out” consumers as these claims companies could start charging fees to cover the extra payments they face.
Claims firm Johnson Law Group said: “All this does is price out legitimate consumers and encourage delay and obfuscation.”
In a consultation response, the Money Advice Trust added: “We are concerned that disreputable CMCs could mislead consumers by suggesting that there is a fee to make a complaint irrespective of who makes the complaint. This could result in consumers using CMCs because of misinformation about free access routes.”
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