It is widely known that a final decision by the Financial Ombudsman Service (FOS), which has been accepted by the complainant, is legally binding on the firm but not binding on the complainant. If the complainant does not agree with the decision, he or she has the right to pursue the matter through the courts. Indeed, that right applies at any point in the process as the complainant does not have to wait for a final response but can withdraw from the FOS process at any time and pursue the matter through the legal system.
The FOS is intended to be, in its own words, “an informal alternative to the courts and aiming to make decisions fairly and reasonably.” However, some complaints are taken through the courts directly without reference to the FOS first. These are most likely to be cases where the amount of redress sought by the complainant is substantial, where it exceeds what the FOS might award and, certainly, where the amount exceeds the maximum award the FOS can enforce, the award limit.
The award limit is adjusted each year in line with inflation, as measured by the Consumer Prices Index (CPI).
Currently (as of 1 April 2020), the award limits are:
- £355,000 for complaints referred on or after 1 April 2020 about acts or omissions by firms on or after 1 April 2019
- For complaints about acts or omissions by firms before 1 April 2019 and which are referred after that date, the limit is £160,000
- For complaints referred between 1 April 2019 and 31 March 2020 about acts or omissions by firms on or after 1 April 2019, the limit is £350,000 and for any complaints referred before 1 April 2019, the limit is £150,000.
We recently spoke with a firm that had a client who had decided to go straight to small claims court rather than through the FOS, although the firm had made the required references to the client’s right to refer to the FOS in its final response letter. The amount in question was very small, less than £3,000, so it is not clear why the client would incur court costs instead of using the free FOS dispute resolution process. Especially since taking court action would have remained an option if he did not like the FOS decision. The firm asked us if the converse was true, i.e. whether the client could refer the complaint to the FOS if he did not like the court decision!
The answer is no.
There are certain circumstances where – even though a complaint is within the FOS’s jurisdiction – it can be dismissed without any consideration of its merits. This is sometimes called ‘termination’.
There are actually 17 sets of circumstances where the FOS may ‘terminate’ a case. The circumstances listed below are a few of the more common situations – the first confirming that a case cannot be considered by the FOS if it has been or will be subject to consideration by a court:
- A court has already considered, or will be considering, the issue or issues in the complaint;
- The complaint is one that is more suitable for consideration by a court;
- The complaint clearly does not have any reasonable prospect of success;
- The firm has already made a fair offer of compensation;
- The complaint has previously been considered or excluded by the Financial Ombudsman Service or by a former ombudsman scheme.