The move to publish Fos decisions should also be set in the wider context of the Fos’ developing powers as it becomes a more unashamed consumer champion by breaking free from some of its legislative and legal restraints.
For instance, the Ombudsman has published its policy in response to CIDRA that, when dealing with complaints about the validity of insurance policies, it will not apply the principles established in the high court cases of Bunney and Cahill that a direction (like a money award) is subject to the maximum award limit – currently £150,000. Instead, pending a jurisdictional challenge on the point, Fos may now direct insurers to confirm cover and assess claims subject only to policy limits – not the £150,000 statutory cap.
The statutory cap may, in any event, become less of a limitation of firms’ exposures. In the ongoing case of Clark v In Focus, which is currently under appeal, the high court found – contrary to previous high court authority – that a complainant could take the statutory maximum award from the Fos and sue for the balance of their losses in court. The court’s decision was all the more surprising given that there is clear language in the FSMA to the effect that an award, if accepted by the complainant, is “binding and final”. The law therefore currently allows complainants to test their case for free before the Fos prior to – armed with a £150,000 fighting fund – taking any decision in their favour to the courts for a top-up. The implications for rules of evidence, limitation and privilege without prejudice for offers have not even begun to be considered.
While the Fos’ developing capacity to make increasingly significant financial awards has made headlines, the Fos’ real power derives from the fact that it is backed by the ever-present threat of the FCA. The FSMA and Fos insist that each case is resolved “quickly and informally” by reference to its particular circumstances, but the rules and regulatory regime combine to make the reality for firms more difficult. The revised memorandum of understanding between the FCA and the Fos provides for increasing flow of information between the two bodies, which has rendered the distinctions between the entities less certain for practical purposes.
The decision to publish Ombudsman decisions now threatens to intertwine the Fos with the work of the FCA. Firms have expressed alarm that Fos decisions will become enforcement in all but name. There is a very real basis for this concern. The “root cause analysis” rules in the complaints chapter of the FCA Handbook (DISP 1), in conjunction with the treating customers fairly principle, require firms to take into account Ombudsman decisions and otherwise rectify any systemic or recurring problems revealed, regardless of whether the other customers have complained.