Huge banking rule change that could cost YOU £250 extra and how to avoid it

A HUGE change is kicking in from this month that could end up costing savers more if they make a complaint.

From April 1, the Financial Ombudsman Service (FOS) has begun charging third-party claims firms a fee for passing complaints to it on behalf of consumers.

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If you use a regulated financial services company such as a bank, pension provider or investment firm, you can make a complaint about them to the FOS if you can’t resolve it with them directly.

The FOS will then look at both sides and, if it upholds your complaint, it will set out what the firm must do to put it right.

Claims management firms (CMCs) can help people to make a claim to the FOS in exchange for taking a cut of their compensation.

This is currently capped at 30% of the payout for firms regulated by the City watchdog, the FCA, but some firms are not covered by this and may charge even higher fees.

However, customers of financial firms can make a complaint to the FOS for free themselves and don’t need to use a CMC.

The FOS has raised concerns that because claims firms are financially incentivised to put complaints forward and face no penalty for unsuccessful cases, they have been essentially trying their luck.

This has meant the FOS has been inundated with cases that potentially have no real basis.

And financial services firms, which have to pay a £650 case fee for every complaint investigated, have been lumbered with the cost of these spurious claims.

As a result, the FOS has decided to levy a £250 charge for every case put forward by a claims firm from April 1.

If the case is successful, they will receive £175 back, so they only pay a £75 fee. At the same time, the fee financial services firms pay will be reduced to £475.

Claims firms will be able to bring ten cases to the FOS for free each financial year, and the charge will be applied to any cases after this.

In an announcement, the FOS explained: “A large proportion of complaints referred to us in recent years have been driven by professional representatives who either charge consumers or take a percentage of any redress awarded.

“Currently, financial service firms pay a £650 case fee for complaints against them that we investigate, while professional representatives do not pay a case fee.

“Under the new rules, if a complaint referred by a professional representative is not upheld or is withdrawn, the financial business against whom the complaint was made will pay a reduced case fee of £475, instead of £650.

“The move aims to make the funding arrangements for us fairer and to encourage professional representatives to submit better-evidenced complaints, considering their merits more diligently before referring them.”

While the news has been welcomed by the financial industry and consumer experts, concerns have been raised that this fee could end up being passed down to consumers who use claims firms.

A number of solicitors and claims firms warned in response to the idea that it would end up “pricing out” consumers as they will likely end up paying a fee so claims firms are not left out of pocket.

Claims firm Johnson Law Group said: “All this does is price out legitimate consumers and encourage delay and obfuscation.”

In a consultation response, the Money Advice Trust added: “We are concerned that disreputable CMCs could mislead consumers by suggesting that there is a fee to make a complaint irrespective of who makes the complaint.

“This could result in consumers using CMCs because of misinformation about free access routes.”

The best way to avoid incurring any extra fees is to avoid using a claims firm altogether and to make your complaint yourself for free.

You may be able to get help with your complaint free of charge from services like Citizens Advice.

How to complain to the FOS

If you have a complaint about your service, contact the company involved first and make a formal complaint.

Keep a note of names, dates and times of any correspondence you have with the company and try to put everything in writing, or make notes of anything discussed over the phone.

If the company makes any promises over the phone, follow up in writing as soon as possible confirming what was said.

If the company does not resolve your issue, you’re not happy with the outcome or if they don’t respond within eight weeks, you can complain to the FOS.

Start a complaint by visiting financial-ombudsman.org.uk/make-complaint.

You may need to provide copies of evidence to support your claim, so make sure you have those to hand.

The FOS may ask you for further evidence or for more information – it’s a good idea to provide everything you are asked for if you can.

If the ombudsman upholds your complaint, it will tell the company how it needs to put it right. You can then accept or reject this outcome.