Previously (unless you were a micro-enterprise or a small business) the Financial Ombudsman Service (“FOS”) would only have the jurisdiction to hear complaints from consumers with a financial award limit of £150,000.
From 1 April 2019, the jurisdiction of the FOS is extended to cover small and medium-sized enterprises (SMEs), certain charities and trusts and personal guarantors.
Practically, this means that medium-sized enterprises will now for the first time (subject to the below) be able to bring complaints to FOS up to a maximum award limit of £350,000.
Qualifying SMEs will be enterprises that:
- Have an annual turnover of less than £6.5m (or equivalent in another currency); AND
- employ fewer than 50 people; OR
- have a balance sheet total of less than £5m (or equivalent in another currency).
Qualifying charities are those with an annual income of less than £6.5m at the time of the referral of the complaint.
Qualifying trusts are those with a net asset value of less than £5m at the time of the referral of the complaint.
Increased Award Limit
From 1 April 2019 the £150,000 award limit will change to:
- £350,000 for complaints about acts or omissions by firms on or after 1 April 2019
- £160,000 for complaints about acts or omissions by firms before 1 April 2019, which are referred to the FOS after 1 April 2019
- For complaints referred before 1 April 2019, the limit will remain at £150,000
The new award limits will automatically be adjusted on 1 April each year to ensure they keep pace with inflation, as measured by the Consumer Prices Index (CPI).
Previously, the FOS could recommend that more than £150,000 was paid, but could only oblige firms to pay up to £150,000.
Good News – Access to Justice
The changes have attracted criticism especially from the regulated firm and insurance sector. However, post the Jackson cost reforms it has often been difficult for complainants to fund the costs of litigation and adequately insure against possible adverse costs orders. The changes at FOS may be an important step towards access for justice. Until now, those seeking to pursue high value or complex claims at FOS (for example insurance claims protecting against significant loss and/or advice in respect long term investment or mortgage claims) may have been short changed from the £150,000 limit without the means to pursue court action as an alternative to recover the balance.
Further criticism has been raised in respect of whether FOS is fit for purpose to deal with a growing number of high value or complex claims. However, the DISP rules in the FCA Handbook currently provide that an ombudsman will convene a hearing if it is necessary to fairly determine the complaint and it is anticipated that FOS will create a ring-fenced, specialist unit to handle complaints from SME customers.
It is also noted that from 1 April 2019 the Financial Compensation Services Scheme (“FSCS”) limit was raised from £50,000 to £85,000 in respect of many of the products it covers: including investments, mortgage advice, life and pensions advice and long-term insurance. The FSCS is the UK’s safety net for customer’s of FCA regulated firms unable or likely to be unable to pay claims against it.
How can JCLM help?
As the value and complexity of FOS matters is likely to increase it is more important than ever that specialist advice is sought before a claim is contemplated.
Have you been badly advised by an IFA or a firm regulated by the FCA?
Mis-sold an investment or an insurance product or mortgage ?