The Financial Ombudsman Service's response to COVID-19

A few weeks ago, the FOS announced it was closing its office in response to government guidance but was continuing to receive and respond to complaints both old and new. The FOS' latest newsletter offers useful further insight into the FOS' response to the current crisis.

We recently reported that the Financial Ombudsman Service had closed its offices due to the Covid-19 pandemic.  In its latest newsletter published last week, the FOS provided a useful update on its response to the crisis as well as a general update on its operations.

The FOS has already begun to receive Covid-19 related complaints and warns that there will be significant delays in processing new complaints.  Consumers are expected to wait up to 4 weeks to receive an acknowledgement and cases will take several months to be allocated.  The current estimated timeframes for complaint resolution range from four months for banking and mortgage complaints to seven months for investment and pension complaints.  Highly complex cases, those involving fraud for instance, will take even longer.  This may come as no surprise for financial services firms well used to the FOS taking many months or even years to resolve complaints.  However, it is worth noting that, at present, it may take some considerable time for firms (and their insurers) to be notified about new complaints referred against them.

The FOS also flags that instances of fraud have been on the rise since the start of the pandemic as the ill-intentioned have seen new opportunities among the chaos.  The FOS has published a useful checklist to help people stay safe while working from home, and regularly updates its website with details of the latest scams.  Firms may wish to share these details with clients to assist them in staying safe.

Fraud cases aside, the FOS is expecting to see an increasing number of complaints in other areas of financial services, most notably complaints about insurers.  In this regard the change to the definition of 'eligible complainant' in the FCA handbook last year will allow more insureds to refer complaints.  The FOS has urged insurers to treat customers fairly in these difficult times and to "think beyond a strict interpretation of the policy terms and consider carefully what’s fair and reasonable in each case, taking into account the unprecedented situation".  However, the FOS does accept that whether cover is available will depend upon the policy terms and it notes that policyholders unhappy with their insurers will, as usual, need to complain to their insurer first, before approaching the FOS.

The FOS also expects future trends to include increases in complaints relating to mortgage and credit products, travel and wedding insurance policies, as well as general financial difficulties.

It is worth noting, as the FOS does in its update, that the FOS' binding award limit has increased to £355,000 for complaints referred on or after 1 April 2020 about acts or omissions by firms on or after 1 April 2019.  New complaints in relation to Covid-19 issues will attract this higher award limit, which will potentially have a significant impact on firms and their insurers.

The FOS continues to plan ahead, even in these uncertain times, and has published its strategic plans and budget for 2020/2021.  The FOS is increasing its per-case fee (generally paid only by larger firms) for the first time since 2013 while retaining the "free case" allowance at its current level of 25 and freezing the minimum levy paid by firms.  These steps appear to be intended to relieve pressure on some of the smaller firms in the industry, which may be the most vulnerable to the current circumstances.