The Financial Ombudsman Service has agreed to review offers made by firms to their clients in early settlement cases amid concerns taking a more neutral stance could jeopardise fairness and consistent outcomes.
The Fos, which is trying to get more businesses to settle claims early, had proposed to present proactive offers from businesses ‘neutrally’ to customers, essentially making clear that in putting the offer forward, it could not confirm whether it thought the offer was fair or not.
But in its consultation feedback published yesterday (November 1), the Fos said financial businesses and organisations representing consumers were concerned this could inadvertently present a risk to fair and consistent outcomes for consumers, as well as impact the ultimate effectiveness of the initiative.
The Fos said: “We have reflected on this feedback and agree that it would be better for all parties for the Financial Ombudsman to review the fairness and reasonableness of any offer communicated through this process.
“We will make the necessary arrangements to ensure that any proactive offer made through this process is reviewed by the Financial Ombudsman. Where it appears to be fair and reasonable, we will put it forward to the customer. Where we do not consider it obviously fair and reasonable, we will challenge it.”
In practice this means once a business informs the Fos of its intention to settle a complaint, this will then be reviewed by the Fos to ensure it is fair and put forward to the customer if so.
If the customer accepts the offer, or an agreement is reached following a counter-offer, the complaint will close.
The consultation had also proposed temporary changes to its case reporting to entice firms to settle early and reduce queues at the complaints body.
At the time, the Fos said it wants more firms to settle complaints before they are investigated by the body but acknowledged firms were concerned about building a bad image if this leads to high uphold rates.
To allay these concerns the Fos proposed to create a separate category for recording a complaint that is proactively settled by a business before the Fos has issued its opinion.
Complaints settled in this way would not – for a restricted period – contribute to a business’s overall uphold rate.
The Fos said based on the feedback received it will follow through with this proposal.
The separate recording will apply to all complaints settled early and also those where a customer declines the offer, but the Fos deems the offer to be fair.
A ‘cut-off’ date of October 31, 2021 will be implemented for complaints brought under this proposal, meaning any complaint deemed chargeable by the Fos on or after November 1, 2021 will not be in scope.
The Fos will revert to how it currently records the outcomes of complaints from April 1, 2022.
A case fee will continue to apply to all complaints settled in this way.
Earlier this year, former chief executive of the Fos Caroline Wayman stepped down from her role after it was revealed that the ombudsman was facing a backlog of 158,000 complaints.