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FOS under the spotlight: is it an impartial body?

by Michelle McGagh on Nov 16, 2010 at 10:58

FOS under the spotlight: is it an impartial body?

The Financial Ombudsman Service (FOS) has had it pretty easy in the past 10 years.

In the decade since it was established under the Financial Services & Markets Act it has come under external scrutiny just twice.

An independent body assesses the FOS every three years and it has so far been subject to Treasury review in 2004, a second was undertaken in 2008 by Lord Hunt and another is due for 2011.

But the FOS has been thrust centre stage before 2011, firstly by the news that consumers who receive compensation cannot then sue their advisers. It may also have to defend its actions in the European Court of Human Rights (ECHR).

No doubt advisers will be pleased by the judgement on compensation. Despite concerns about the bypassing of the FOS and a rise in ‘no win, no fee’ cases, this decision is fair and based on common sense. It is right that consumers shouldn’t be allowed two bites of the compensation cherry. 

However, we are all waiting with bated breath for a conclusion to IFA firm Heather Moor & Edgecomb’s battle against the FOS.

The firm argues that the FOS is not an impartial or independent body and its processes are not compatible with the rule of law.

I think there are probably a lot of advisers who have misgivings about the way the FOS works.

For a start, its remit has shifted dramatically from the role of mediator to quasi-judicial body. While it looks to follow the rule of law it can deviate as it sees fit. And unlike a court of law where justice must be done and seen to be done, the FOS is free to make judgements behind closed doors.

Although people may moan about lawyers, at least they are trained in law. How much training do ombudsmen receive? Surely not enough to cover every nook and cranny, rule change and legislative u-turn experienced by financial services over the past 20 years.

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4 comments so far. Why not have your say?


Nov 16, 2010 at 15:43

l support Heather Moor and Edgecomb insomuch as l think the FOS's arbitary decisions without right of appeal do infringe an IFA's human rights. Like the FSA, they are trained to believe that they are above the law, and need to be brought back down to earth.

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Duncan Carter

Nov 16, 2010 at 18:27

It seems to me that FOS wishes to have the best of all worlds. It has quasi judicial status but does not wish to be accountable. It has recently taken to stating that it also has an inquisitorial role but there is no equality in the ultimate outcome for firms compared with that of clients.

For me this ability to effectively 'invent' scenarios that are little more than hypotheses and then determine an outcome as if they are fact is legally dangerous and explicitly unfair.

There in lies the problem, the FOS is not operating under recognised law but rather it seems to be able to make new 'law' on a case by case basis based on a 'what it thinks possibly happened'. This is entirely unsatisfactory as is the test for 'burden of proof'.

Essentially a complainant can without any real fear of recourse, make any allegation without any evidence and challenge the firm to prove its innocence. This looks like guilty until proven innocent which would not see the light of day in a court in any democratic country.

The Treasury reviews will not be reviewing in terms of legality and so no change can reasonably be expected. I'm not sure a legal review would have quite the same outcome. FOS is not alone in this, other QUANGOs operating in the Financial sector have similar powers that nobody seems able to keep in check.

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micky mouse

Dec 26, 2010 at 09:46

The FOS is the biggest 'Ambulance Chaser' in the UK. It accepts cases with fraudulent angles and ignore them. When questioning the FSA about how to stop a specific fraudulent case via David Kenmir, his sidekick employee Graham Dargie openly admitted to me (in a recorded conversation) 'its the nature of the beast and there is no downside for the client in the event of trying it on fraudulently'. IFAs need to have a body to lobby on their, HA! having a laugh? Can AIFA hear me hello!!!!!!!

Also a specific case I am aware of whereby John Pattinson an adjudicator, upheld a case against an IFA because he had asked him what qualifications he held? Also when explaining to him that there was 'no loss' on an endowment case regardless, he didn't understand how that could happen. The case was subsequently overturned by someone who had a legal background and a brain!

Another specifica case I am aware of they have upheld a complaint on flimsy grounds and against a 'non regulatory requirement', e.g. they make it up as they go along with their own rules.

What we have is poorly trained people who have little understanding of the real business world whilst also making rules up as they go along. So firms not only have to contend with a quagmire of rules from the FSA but also a new set of rules as the FOS see fit. Mix that up with no personal accountability and we have the most dangerous ambulance chasing Leviathan out there. We now have 3 of these monsters, The FSA, the FOS and the FSCS. I also have stories about the FSCS. I await for an FSCS article before posting.

I hope Andrew Tyrie sees this post as he predicted all of this in his CPS report in 2000!

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Dec 28, 2010 at 13:17

Well Said!! Mickey Mouse

l have also seen such travesties of justice, and one even worse, the complaint being made by somebody acting on behalf of the complainant but even though the complainant accepts that the ambulance chaser has lied on her behalf in order to get "compensation", she says that she doesn't care what this guy put on the form (and she then signed) on the basis that he " got her money" which the ambulance chaser then re-invested for her. So, he is believed above written evidence supplied by the IFA,which, if even read by the FoS, has been completely ignored as the FoS went out of their way to overturn the FSA's decision to reject the claim.

l hope Andrew Tyrie reads this too

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