FOS complaints and hindsight – categorical statement from the Chief Ombudsman

The FCA has been producing a range of temporary measures with the aim of ensuring that firms can work at pace during the pandemic for the benefit of customers. However, where procedures are bypassed or corners cut what will FOS do in response? The response from FOS to that questions raises another – the use of hindsight when coming to its decisions.

In light of FCA measures, such as guidance for lenders on mortgage payments holidays (relevant to the FI market) and messages firms can give customers about investments and life assurance without straying into regulated advice (relevant to the PI market), firms have raised concerns that the FOS may judge complaints with the benefit of hindsight.

In light of these concerns the FCA wrote to FOS on 15 April 2020 saying "… We know that the ombudsman service considers complaints based on the circumstances at the time and we want to provide as much reassurance as possible on this point, to ensure that firms respond positively to our measures, and consumers get the help they need…".  The FCA's letter went on to ask the FOS to confirm that "… in determining what is fair and reasonable in all the circumstances of the individual case, the ombudsman will take account of the operational challenges faced by firms during this period, and the FCA's revised expectations of what constitutes compliance with our rules, guidance and standards, as well as what countered as good industry practice at the time…".  The FCA statement is broadly a reflection of what is in the FCA Handbook, DISP 3.6.4R.

The Chief Ombudsman responded on 16 April.  The response states  "… in deciding what is fair and reasonable in the circumstance of an individual complaint, we must take into account relevant law; regulators' rules, guidance and standards; codes of practice and what the ombudsman considers to have been good industry practice at the time.  We do not make decisions with the benefit of hindsight…" (our emphasis).  The letter goes on to confirm that FOS will take account of guidance providing regulated firms with additional flexibility to help deal with difficult conditions.

The exchange between the FCA and FOS is perhaps not surprising in the current climate when it is all hands to the pump to keep things going during the current crisis and as already noted, the wording adopted does broadly reflect that in DISP.  However, the categorical confirmation from the Chief Ombudsman that FOS does not use the benefit of hindsight to make decisions is likely to leave some with experience of FOS raising an eyebrow; for many that is not always the experience and instead many facing complaints often are left feeling that FOS has moved the goalposts somewhat.

Will the crisis see a change of heart at FOS or is this just limited to dealing with complaints arising during the pandemic? Whatever the answer, when responding to complaints before FOS it may be worthwhile, depending on the circumstances, adopting the quote from the Chief Ombudsman that FOS does not make decisions with the benefit of hindsight and see whether that results in a different approach; with the benefit of hindsight of course.