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The FOS doing the bank’s job with PPI helping millions of Consumers


A recent interview with Natalie Ceeney, Head of the Financial Ombudsman Service (FOS), with the Mail Online gave a fascinating insight into the scale and complexity of running the organisation that is tasked with the job of ‘putting right what has gone wrong’. The understatement of the interview was the comment, “our workload has gone up astronomically”. In round numbers, FOS helped two million people last year, a million the year before and just under a million the year before that. The growth in the numbers of people dealt with by FOS show financial institutions are not dealing with complaints properly. The majority are complaints about mis-sold PPI.

What’s gone wrong with treating customer fairly (TCF)?

Within the financial services sector the previous regulator (the Financial Services Authority) has, at the core of its approach, required firms to ‘treat customers fairly’ (TCF). TCF has formed, over the last decade, the foundation of all FSA regulation. There can be no doubt that every member of staff in every financial institution knew that the FSA expected firms to treat customers fairly in all their dealings with customers. The fact that four million customers in three years have sought the assistance of FOS shows that things have gone wrong in two fundamental ways.

The ‘double whammy’’

If the number of people seeking the assistance of FOS merely identified the number of people who had been mis-sold products, then the statistic would highlight the arrogance that organisations displayed in ignoring the FSA principle of treating customers fairly when selling financial products. However, the contempt that financial organisations have for their customers and regulation needs to be put into context by considering the number of complaints to FOS and its purpose.

FOS is meant to be an organisation of last resort; an organisation that looks at complaints that cannot not be settled between the parties. Clearly, there will always be some cases where the sides cannot settle their dispute and the service of a third party is needed to resolve the disagreement. It is equally obvious that the third party, having looked at the detail of each specific case will sometimes find in favour of the financial institution and sometimes in favour of the customer; it all depends on the evidence. The law of averages would suggest that the split in such determinations should be fairly and equal. It is, however, worrying that so many cases that are referred to FOS end up being found in favour of the customer. Although, on one hand it reassuringly shows that FOS is happy to find against financial institutions where appropriate (even on a massive scale where there has been institutionalised mis-selling), on the other it shows that financial institutions having mis-sold a product compound the consumer detriment by incorrectly rejecting valid claims, this is evident and supported by recent FOS statistics.

The evidence is consumer detriment

The FOS website shows that over 70% of consumer complaints referred to them are upheld against the business. It is little wonder, therefore, that Mrs Ceeney is quoted as saying, “Over the last three years trust in banks pretty much hit an all-time low….”.

While it is correct to state that no regulator can deliver a “zero-failure” regime, it is not unreasonable to expect things to be put right when they have gone wrong without adding to the consumer detriment. The time is now right for financial institutions to show that they understand TCF and to change their redress procedures to ensure that customers who have been mis-sold are not further disadvantaged by inappropriate claim rejections and procedural delays.

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