City Minister supports imposition of FOS case fees for CMCs

11 November 2024. Published by David Allinson, Partner

In what may well be welcome news for the industry, the new City Minister has supported the FOS' proposals to charge claims management companies (CMCs) a £250 fee for referring complaints to the Financial Ombudsman Service. The hope is that this prevent FOS being overwhelmed with 'poorly evidenced' complaints.

Regular readers of this blog will know that the FOS proposed charging claims management companies a fee of £250 to lodge a complaint earlier this year (to be reduced to £75 if the complaint was upheld). A  consultation was launched in May 2024 which highlighted that claims management companies (CMS) could bring significant volumes of complaints to FOS at no cost, with little prospect of these being upheld. This is in stark contrast to the financial cost for respondent firms, who are now obliged to pay a £650 case fee regardless of whether or not a complaint is upheld. 

The paper noted that 20% of cases referred in the past 2 years came from CMCs and that that only 25% of these resulted in a different outcome for the complainant than that which they had already been offered by the respondent firm. 

FOS' proposals are intended to allocate an element of the costs of resolving cases to professional representatives who derive a benefit from using FOS. The plan is to allow CMCs (and other professional representatives) three 'free' cases per year before charging a £250 fee, reducing to £75 if the complaint is found in favour of the complainant. If the £250 fee has been paid, this will also result in a reduction of £175 to the fee paid by the respondent.

Feedback on the proposals is expected by the end of the second quarter of 2024/25. The proposals have however found support from the new City Minister, Tulip Siddiq, who highlighted concerns that CMCs were submitting 'significant numbers of poorly evidenced or template responses to FOS with no financial disincentive for doing so.'

Whilst consumer groups raised concerns around the fees (noting in particular that there will be a charge even for successful complaints) it seems that this is inevitable given the Government's support. In circumstances where FOS notes it has received over 15,000 complaints about car finance alone in the three months to April, it is hoped that this will ensure that complaints brought by CMCs have merit and are well set out. It's also worth noting that, under the proposals, consumers bringing cases directly will not be charged (and will also keep the full value of any redress payment). 

Stay connected and subscribe to our latest insights and views 

Subscribe Here