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New charges for claims management firms proposed by financial ombudsman

23 May 2024
in Business
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New charges for claims management firms proposed by financial ombudsman
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Claims management companies (CMCs) face new fees of up to £250 to lodge a case, under proposals from the financial ombudsman to make costs fairer.

The Financial Ombudsman Service (FOS), which resolves complaints from consumers about financial firms, said the fee would be reduced to £75 if the case outcome is in favour of the consumer.

The service will remain free to people who bring their case directly to the service, as well as families and friends, charities, and voluntary organisations who may be helping them, the ombusdsman said.

The proposed new case fees are part of a consultation, which is open until July 4.

Businesses responding to a complaint currently pay £650 per case.

Professional representatives can play an important role in resolving financial disputes. However, they gain financially from our service without contributing to the running costs

James Dipple-Johnstone, FOS

The ombudsman said it is seeking to make its fee model fairer, by recovering some of its costs from CMCs and representatives as well as financial services firms.

As is the case for financial services firms, all professional representatives will be allowed three free cases a year, beyond that they will be charged the £250 fee, reduced to £75 if the consumer’s complaint is upheld, the service said.

Under the proposals, if the service does not uphold the complaint, the higher fee collected will be used to reduce the fee for the financial business against whom the complaint was initially raised.

James Dipple-Johnstone, deputy chief ombudsman at the FOS, said: “We are committed to improving our service so it is as easy to use and accessible as possible, while ensuring it remains free for all consumers and that those with upheld complaints can keep all of any award we make.

“Professional representatives can play an important role in resolving financial disputes. However, they gain financially from our service without contributing to the running costs, and with little incentive to ensure that claims they advance have merit.

“The new proposed charges are important to ensure we cover the costs associated with helping resolve disputes and we feel reflect a fairer allocation of those costs.

“We welcome all views on our proposed fee changes.”

The Government has started the process of exercising powers given under the Financial Services and Markets Act 2023 to allow the ombudsman service to update its current fee-charging framework.

CMCs often take a chunk of any payout awarded, but consumers keep the full value of any redress awarded when they bring cases directly to the ombudsman themselves.

Over the past two years a fifth (20%) of cases referred to the service have been brought by professional representatives, the ombudsman said.

Of these cases, fewer than a quarter resulted in a different outcome for the complainant than they were already offered by the responding firm, it said.



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