The Financial Ombudsman Service has launched a series of quick guides for small businesses outlining its funding, jurisdiction and how it calculates redress.
The five guides cover:
- Funding and case fees;
- Jurisdiction where investment firms are no longer authorised;
- Calculating redress for mis-sold mortgage endowments; and
- Calculating redress in investment complaints.
For example, the guide on funding and case fees says case fees do not become payable if the Fos decides at the initial stage the complaint is not something it deals with or is clearly without merit.
But, it adds sometimes it may not be apparent at this stage whether the complaint should be dismissed and, if it needs to look into the issues in more detail, a case fee becomes chargeable even if it later decides the complaint is without merit.
The quick guide on hearings explains the Fos is under no obligation to hold a hearing and if either side in a dispute would like one they must put a request in writing.
It states: “We deal with complaints differently from the courts and our procedures are less extensive and formal. We generally decide complaints on the basis of the paperwork that the consumer and the business send us. We do not take evidence on oath, summon witnesses or cross-examine the parties.”
The quick guide on mortgage endowment redress explains the standard approach is to calculate the consumer’s loss by comparing their current position with the position they would now be in if they had taken out a repayment mortgage instead.
In the most straightforward cases a firm needs to compare:
- The total amount the consumer has actually paid in endowment premiums and mortgage interest payments; with
- The total premiums they would have made on an equivalent repayment mortgage; and
- The current surrender value of the endowment policy; with
- The amount of capital the consumer would have paid off an equivalent repayment mortgage by now.
In investment complaints, where the alternative suitable investment is known the Fos is likely to require the firm to calculate the difference between how the unsuitable investment actually performed and how the alternative suitable investment would have performed to the date the firm pays the redress.
For cases where the alternative suitable investment is not known, firms calculate the difference between how the unsuitable investment actually performed and how some alternative suitable investment would have performed to date, assuming a return on the amount invested equivalent to the base rate +1% during the relevant period.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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