The Association of IFAs today calls for a radical overhaul of the structure, process and charges of the Financial Ombudsman Service (FOS).
In its response to the Hunt Review of the FOS, AIFA says a restructure is necessary to make it “more transparent, accountable and easier to do business with”.
It says there must be a clear separation between the way complaints are handled between large and small firms, pointing out smaller firms rarely receive complaints and are therefore “at risk” of getting lost in its bureaucracy as consumers. A small firms division, such as that at the FSA, would be the best way to combat this, it says.
It says firms within the new division should have access to an oral hearing, arguing the “lack of this measure potentially infringes European Human Rights”.
AIFA believes the FOS should also charge complainants for bringing cases which have no merit, and should be able to look at complaints from a “joint liability” perspective. Those who have manufactured “toxic” products should be equally liable for their negative effects on consumers as the adviser who distributed them in good faith, it says.
In its response, The Association outlined how the FOS should publish information on firms receiving the most complaints, and should instruct firms on how much compensation to pay, “rather than relying on formulaic instructions that are open to abuse”.
Chris Cummings, director general of AIFA, says: “We believe that this is now a real opportunity to improve FOS for its benefit as well as that of firms and consumers.
“The creation of the Small Firms Division allows complaints against smaller firms to be treated individually with due regard to the needs and interests of these firms and their consumers – so allowing for a process that is fair to all.
“We are calling for ten free cases. The case fee can be a significant burden for small firms despite only being a fraction of the Ombudsman's case load in comparison to that of the banks and insurers.
“We also feel it is unfair that the FOS charges case fees when the case is found to be outside of FOS jurisdiction.
“However, we believe that firms with particularly high levels of complaints received and upheld should be named and shamed with the relevant numbers publicised. We need to ensure that consumers understand who they can trust.”
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