FSCS explains reason for Rowanmoor claims delays

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FSCS explains reason for Rowanmoor claims delays
Caroline Rainbird, chief executive of the FSCS (Carmen Reichman/FTA)

The Financial Services Compensation Scheme has said it is not duplicating work already done by the ombudsman on Rowanmoor claims but there were legal reasons it could not use the recent Fos case as a blue print for its decisions. 

The lifeboat scheme is facing delays with claims about defunct Sipp firm Rowanmoor after hundreds of clients were re-routed from the Financial Ombudsman Service following the provider's collapse in August last year.

Investors have questioned why following a successful sample case at the Fos in January 2022, which found in favour of the investor and asked Rowanmoor to compensate him fully, they were still being asked to wait for Rowanmoor to be declared in default by FSCS, and their claims to be processed, a year later.

Rowanmoor's claims pipeline was credited with its collapse and some claimants have now reached retirement age and are concerned they do not have enough funds to retire with due to delays with their claims.

Chris Bryans, a financial adviser who helps clients with their claims through his firm Complaints SOS, has Rowanmoor claimants who have been waiting for a decision from the FSCS.

He said: "These are ordinary people who have lost their life savings – in many cases several hundred thousand pounds and these retail customers don’t understand how the Fos, the FCA, and now the FSCS, can stand by while their lives are on hold.  

"One of our customers who has lost over half a million pounds from a final salary pension says 'it is exasperating and depressing - there still appears to be no end in sight and still no way clear way out'.

It would not be appropriate for FSCS to simply follow a Fos determination without conducting our own investigations because of our stricter rules.FSCS

"The complete lack of information and detail is what is helping the scammers to target these very vulnerable customers and we are very concerned for their health and wellbeing."

The FSCS has now addressed the long waiting times and why it is unable to use the ombudsman's decision as a blue print.

It explained the way it determines claims and the way the Fos determines its complaints are different, particularly when it comes to the question of whether the firm owes a civil liability to its claimant, which is a core test for claims with the FSCS, but does not determine a Fos decision. 

A spokesperson said: "It is not in our interests to duplicate work that has been done by the Financial Ombudsman Service or delay declaring a firm in default and processing customers’ claims. 

"The Fos determines complaints based on whether it considers that regulated firms acted in a way which was fair and reasonable in the circumstances.

"The Fos does not decide complaints based on whether a firm owes a civil liability to a complainant, which is the test that FSCS must apply under our rules.

"This means that the eligibility criteria under our rules will not necessarily be met just because the Fos may uphold a complaint in similar circumstances."

For instance, often the Fos refers to the FCA’s Principles for Business when upholding complaints, but because a breach of the principles is not enforceable as a civil liability, FSCS cannot uphold a claim solely on this basis."

Claire Collinson, a solicitor helping a claimant, believes all of the regulatory conditions FSCS needs to fulfil to declare a company in default have been met with Rowanmoor, which she says has been confirmed by a combination of the Fos decision and Rowanmoor’s administrators’ reports.

"It is undoubtedly the case that once a final decision has been made by the Fos and accepted by a consumer, a civil liability is created because a final decision is enforceable through the Civil Courts and creates, therefore, a civil liability.

"If they have a reason for further delay, I think it’s reasonable to expect that to be explained to the consumers who are waiting for the compensation confirmed by the Fos (and accepted by Rowanmoor) to be due to them," she said.

But the FSCS said the eligibility criteria in its rules do not just require a civil liability, there needs to be a civil liability in respect of a “protected claim”.

"A 'protected claim' is a term defined in our rules and not in the Fos rules. Whilst a Fos award is enforceable in court, the rights of enforcement of that money award do not create a 'protected claim' in respect of a civil liability under our rules," it said.

"FSCS does take into account the Fos’ determinations, and considers information and evidence received from the Fos as part of our decision-making process, but it would not be appropriate for FSCS to simply follow a Fos determination without conducting our own investigations because of our stricter rules," the spokesperson added.

FSCS update

In an update to investors on May 22 the FSCS stated it had now received all available information and documentation from external parties and was now reviewing the evidence with a view to identifying eligible claims.

Bryans, who received the update on behalf of his clients, said more forward guidance was needed to assure his clients. "The least we would expect of the FSCS in these circumstances is that they appreciate the impact the lack of information is having and provide some clarity," he said.

"Surely there is some organisation in the FSCS and someone knows what’s happening next week and the week after. When do they expect the reach a decision on civil liability? Then what happens – do they get the 200 files out of the cupboard and start looking at these again?

"Meanwhile, the remaining claimants have to wait another year to see what happens. It is very frustrating for us as advisers having to sit with claimants who are in tears and explain we have no idea what is going on, we have no idea when the next information will be available and we have no idea what the outcome will be - so your life is still on hold and there are still fees in the Sipp and the property can’t be sold and the Sipp can’t be closed and the truth is it seems nobody cares."

The FSCS says it regularly issues updates on its website and informs claimants individually about progress with their claims.

carmen.reichman@ft.com