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What is the Financial Ombudsman Service?

Written by Ryan Nevin

GUIDE

26th June 2024

The Financial Ombudsman Service (FOS) is an independent and impartial organisation in the UK dedicated to resolving disputes between consumers and financial service providers

The Financial Ombudsman Service is a UK organisation that resolves disputes between consumers and businesses. It acts as an alternative to courts, with that aim of providing accessible access for consumers to address grievances related to financial products and services. The introduction of the FOS came into law through the Financial Services and Markets Act (2000).

The issues handled by the Financial Ombudsman Service can include any financial service, such as banking, insurance, investments, pensions and more. The FOS generally steps in when consumers are unable to resolve their issues with the service provider. An investigation then follows whereby the claim is assessed and information is collected to come to an informed conclusion.

Consumers reserve the right to pursue legal action against the service provider even after the FOS gives its verdict, on the grounds that their decision is unjust

Funded by levies and case fees from the financial services industry, the FOS operates without charging consumers for its services. This funding structure ensures that the FOS remains independent and unbiased. The FOS's mission is to enhance consumer protection, promote trust in financial services, and ensure that the sector operates with fairness and transparency.

Financial Ombusdsman for Small Business

Who is covered by the Financial Ombudsman Service?

The Financial Ombudsman Service provides broad scope when it comes to the parties they cover. Consumers can be defined as individuals working on personal financial dealings, or small businesses who turnover less than £6.5 million annually and have fewer than 50 employees. Micro-enterprises can also be protected by the FOS. These are businesses with under 10 employees and an annual turnover of less than £2 million. The aim here is to protect businesses who do not possess resources for lengthy legal disputes.

Charities with an annual income of less than £6.5 million are eligible for aid from the Financial Ombudsman Service. This is to avoid charities spending mission funds on legal disputes. The same applies to trusts with a net asset value of less than £5 million. This will protect the beneficiaries and ensure that disputes can be managed effectively.

Professional clients can, in some cases, be covered by the FOS when acting in a professional capacity or as a business representative. Individuals acting as guarantors for loans and other financial products can use the FOS to address disputes arising from their obligations. The same applies for executors of deceased peoples’ estates.

Who is covered by the Financial Services Compensation Scheme?

The Financial Services Compensation Scheme (FSCS) protects customers of financial services firms that fail. Individuals are protected up to £85,000 for each failed institution containing their deposits. This can be bank deposits, building society deposits or credit unions. The same applies to those with insurance policies, however the extent of cover can vary depending on the type of insurance policy they hold. Small businesses are also covered for the same things, provided their turnover is less than £1 million. Sole traders are treated the same as an individual.

Insurance claims receive 100% protection for compulsory insurance (such as employers liability insurance) and 90% protection for other types of insurance. There are some exclusions from the Financial Services Compensation Scheme. Large businesses will not be covered, as well as financial institutions and government bodies. Professional clients and eligible counterparties may, in some cases, also not be eligible for cover from the FSCS.

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FOS complaints process

The Financial Ombudsman Service complaints process begins with the consumer raising their issue with the party selling the service. Typically, the institution will then have up to 8 weeks to deal with the issue. Following this time period, it can be escalated to the FOS. This can be done online or over the phone. Following this, the FOS will have an initial assessment stage where they try to collect the facts associated with the case in question.

Following this, they will ask for all documentation and instances of correspondence between parties. This will make up the bulk of the investigation. This should provide the FOS with the tools to mediate an outcome between the parties. However, the consumer is not forced to accept the FOS’ verdict and can pursue legal action if they desire. Following this, the industry will receive communications and literature outlining how they can avoid this kind of dispute in the future.

About the author

Ryan Nevin is an Account Broker at Get Indemnity™ - he is an ambitious professional who is currently studying towards being a Chartered Insurance Broker.

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© 2024 Get Indemnity is the trading name of Insurance Direct Group Solutions Limited authorised and regulated in the UK by the Financial Conduct Authority (FRN 802038). This can be checked on the FCA financial services register by visiting the FCA website https://www.fca.org.uk or contacting the FCA on 0800 111 6768. Insurance Direct Group Solutions Limited is registered in England under company number 11078405. Registered office: The Minster Building, Great Tower Street, London, EC3R 7AG.