18th October 2010

It takes two to tango

I am sure that Ms Ceeney is a very decent person but she is being somewhat disingenuous when she states " The value of FOS was to make us easier to deal with than the court". This may be the consumer view but there are two to tango here and the role of the FOS is not to be just a consumer champion.

As Lord Hunt said in his review, "the explicit test set for the FOS, of determining what is fair and reasonable in all the circumstances of the case, is essential for underpinning its credibility as an alternative to the courts".

Natalie Ceeney, CEO of FOS, went on to tell the Treasury Select Committee last week that the "decision to place the cost of Ombudsman cases on financial services firms through an annual levy and case charges was the decision of Parliament, not the FOS". She said the "organisation 'added value in a number of ways' and said the average £600 case cost was 'significantly lower' than the courts".

Ms Ceeney presides over the FOS yet has no formal industry qualifications or experience in financial services- something that concerned many in the industry prior to her taking up the role. Furthermore, FOS staff qualification levels remain a mystery.

It is worth noting that the FOS's predecessor Chief Ombudsman insisted that PIA Ombudsman adjudicators should hold industry qualifications and even took the relevant exams himself to achieve that competency. The FOS under Merricks did not follow suit, indeed he did not see the need.

Ms Ceeney is correct, the FOS is not a regulator, but it behaves in the eyes of many as if it is. It is a limited liability company, shrouded in secrecy, able by a quirk of statute to rewrite or ignore the law of the land, override parliament and be beyond affordable appeal processes. The Hunt Review said, "The FOS Board should constantly be on its guard for any instances where the FOS is in danger of becoming a quasi-regulator or quasi-legislator".

As a quasi-judicial body, it can make a decision that then becomes legally binding, unless appealed. Under the FOS rules the complainant can revert to the courts to seek redress if they do not agree with the adjudication, an IFA cannot do the same to reverse a decision they may not agree with. The only avenue of appeal open to an IFA is a judicial review and that is beyond the means of most IFA businesses, that is not fair and could be a deliberate regulatory tactic to render any appeal impossible.

In the eyes of very many IFAs, it no longer seems to be an organisation that appears to investigate complaints based upon the evidence available and/or the balance of probability in a fair and reasonable way. In fact it seems to be adopting an inquisitorial role and attempting to forensically disect an advice process that took place, often many years ago, under a number of different regulatory regimes, with a view to finding a reason to gain redress for a complainant in relation to a complaint that in some cases they did not actually make. Furthermore, it investigates complaints that would normally be time barred by the longstop under the Limitations Act 1980. It also acts in contravention of a number of facets of the Human Rights Act.

The FOS was given it's powers by the FSA under FSMA 2000 yet when investigating complaints made about advice given under now defunct regulatory regimes, it ignores SI2326 which states that "an ombudsman is to take into account what determination the former schemes ombudsman might have been expected to reach, and what amount (if any) might have been expected to be awarded by way of compensation, in relation to an equivalent complaint dealt with under the former scheme in question immediately before commencement".

IFA Alan Lakey notes the following two statements by Ceeney's predecessor, Walter Merricks, as a good descriptor of what has shaped the modus operandi.

"FOS is an unusual creature. One that I suggest Parliament would not have dared to create had the groundwork not been laid by a series of voluntary initiatives. It is a one-sided scheme offering an unlevel playing field broadly supported by those playing up hill"

"We do not have to pretend to 'find' what the law is. We unashamedly make new 'law'"

When called before the Treasury Select Committee Merricks responses were such that TSC member, Norman Lamb MP, stated that the FOS made, "quasi judicial decisions that can affect people's livelihoods".

Stick these ingredients in a mix with retrospective regulation, unscrupulous complainants or ambulance chasers who can cry "miss-sold" with no evidence for an event that took place over 15 years ago and you have quite a toxic meal to digest.

It is quite correct for a consumer to rely on the FOS to resolve issues that have become deadlocked. But, there should be some parallels with the UK legal system applied to reach a "fair and reasonable" conclusion.

The starting point should be, as in taking legal action through the court system, presentation of some evidence to back up the claim - no evidence being provided by the complaining party from outset should result in any complaint falling outside jurisdiction. If evidence is supplied that is clearly or demonstrably false or fabricated, this should, at the very least, result in the complainant picking up the tab. The UK legal system, unlike the FOS, does not operate on a "he said/ she said' basis, it operates on evidence and the presumption of innocence until proven guilty.

The current system allows and actively encourages "stale claims" from consumers who frequently "misremember", even in some cases to enter fantasyland in regard to events that took place some 15 or 20 years ago on the off chance that someone, anyone, will throw money at them to go away. This is costing the industry dear and putting many IFAs with years of unblemished records in financial difficulty and stressful danger. So much so that one aggrieved party has actually built a website dedicated to the FOS failings.

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