The Financial Ombudsman Service (FOS) has proposed introducing fees for claims management companies (CMCs) and other professional representatives in a move they claim will reduce frivolous complaints and lower costs for financial businesses.

However, claims management companies are warning that these changes could have dire consequences for consumers seeking redress, particularly against large financial institutions.

The Concerns from Claims Management Companies

This consultation has drawn significant criticism from CMCs, who argue the proposals undermine their ability to hold financial institutions accountable. Johnson Law Group (JLG) said:

“It is a deeply concerning response, which indicates that the Financial Ombudsman Service will do nothing to incentivise good behaviour and engagement with due process by the big banks. The proposed changes risk disenfranchising a huge number of legitimate complainants who choose to rely on the resources, tenacity, and expertise of law firms to hold these banks to account.”

The core points of contention include:

1. Disenfranchising Legitimate Complainants
   Many consumers lack the resources to navigate complex complaints processes on their own. By imposing a proposed £250 fee per case on claimant law firms, the FOS risks pricing out legitimate cases, leaving consumers at the mercy of big banks.
2. Inequitable Fee Structure
   The upfront fee for representatives contrasts sharply with the outcome-based fees levied on financial institutions only after a decision is made. Critics argue this creates a system that penalises claimants while doing little to incentivise financial firms to improve behaviour or engage with due process.
3. Neglected Transparency
   CMCs have also expressed disappointment that the FOS consultation provides little analysis of the very data it sought to justify these changes. Beyond vague mentions of misinformation, there is scant evidence presented to support claims that professional representatives are driving systemic inefficiencies.

A Call for Fairer Solutions

While the FOS insists that the changes will streamline processes and focus on genuine cases, claims management firms are urging the regulator to rethink its approach. JLG continued:

“The proposed up-front fee of £250 per case for claimant law firms is completely at odds with the invoice rendered to banks on conclusion of the process and contradicts the very idea of an outcome-based charging mechanism. All this does is price out legitimate consumers and encourage delay and obfuscation.

“We are also really surprised that there was not one mention of the stats which they were so desperate to obtain, other than a couple of words on misinformation.”

Final Thoughts

For now, the FOS’s proposals are under consultation – claims management firms are calling for solutions that balance cost reductions with fair access to justice. Without such measures, these changes could risk further entrenching the power of financial institutions over consumers.

To share your views, visit the FOS consultation page here. Feedback is essential to ensure any reforms protect vulnerable consumers while promoting accountability within the financial sector.