Every day Repair My Credit Now! advises clients on their options when they have a dispute with a Financial Services Provider (FSP). Where they have the basis to pursue their complaint with the Financial Ombudsman Service (FOS) or the Credit Industry Ombudsman (CIO), we typically advise our client not to do this on their own. This is not done on the basis of inclination or personal preference. We have a specific responsibility to put our client’s interests first.
Based on nine years of experience making complaints to FOS and the CIO there is urgent need of reform of these schemes. This is because the FOS and CIO place too great a burden on aggrieved consumers to prove they haven’t been treated fairly, while offering no aid to consumers to develop and articulate their complaints before being put to FSP’s for their response and rebuttal if they deem it appropriate.
Although we understand the concept of “user friendly” External Dispute Resolution (EDR) schemes like FOS and the CIO which assumes consumers are unrepresented and are therefore largely costs neutral, the hobbling of consumer representation does not work in practice because it creates an inherent resource imbalance. Financial Services Providers (FSP’s) are routinely directly represented by articulate advocates with legal training. Unlike FSP’s (particularly Banks and insurers), consumers do not have a battery of corporate lawyers on the payroll.
The basis of the relationship between the complainant consumer, FSP member and EDR is contractual. The terms of the contract are to be found in the Terms of Reference (TOR’s) of the EDR, and the Membership Agreement. Consumers usually enter this contract with no understanding of the TOR’s or their effect, or the relevant case law. In addition, consumers may not understand that there is very limited scope for review of FOS and CIO Determinations. As Determinations are final (the contract stipulates this) it is imperative that consumers submit well-constructed complaints, and arguments based on the TOR’s.
Over the past decade the Courts have afforded EDR’s broad discretion when making Decisions, and the process by which these Decisions are made is not easily challenged in the Courts. FOS decisions are susceptible to judicial review only if relevant statutory and judge-made law was not applied. Or the Decision was affected by fraud or dishonesty or lack of good faith. Or the Decision was not carried out in accordance with the contract between the consumer or member and the EDR. Or if Wednesbury unreasonableness is proven – namely that the decision was one to which no reasonable decision-maker could properly arrive at on the evidence. This sets a very high threshold.
One example of the breadth of discretion that FOS has to exclude a dispute is the recent decision in Goldie Marketing and Ors v FOS and ANZ  VSC where it was held appropriate FOS’ exclusion of a dispute based on a current lack of qualified staff.
FOS and CIO are not bound by precedent the same way that Courts are so one Determination could differ quite significantly from another. However, this variance is no basis for challenging a Determination. Unless fraud, dishonesty or a lack of good faith is proven, or the high threshold of Wednesbury unreasonableness, a Determination will stand. If these are proven, the Court will order a review of the Determination. Courts will not change a final Determination unless statutory or judge-made law was incorrectly applied.
FOS and the CIO are incorporated bodies funded by a base and user pays levy on industry. This model has its own pros and cons; however we observe that non-government bodies may be perceived as being too closely connected to industry, from whom they recruit many of their staff and Board members, and are therefore too susceptible to influence. That risks undermining the presentation of the schemes as independent. Furthermore, the Board structure is inconsistent with public perceptions of independent tribunals and courts.
In conclusion, reforms of the FOS and CIO must address the imbalance between the consumers who make complaints and the Financial Services Providers (FSP’s) who defend them. Consumers are encouraged to make complaints to FOS “for free” but are not assisted by FOS in the preparation of their complaint or in understanding the case law. The FSP’s on the other hand are often corporations who have large teams of lawyers who understand FOS’s processes and TOR’s, and the applicable case law.
Given the finality of FOS and CIO Determinations, and the lack of judicial review options available to challenge these Decisions, our view is that consumers need assistance from skilled representatives to prepare complaints and argue the merits of the case. Once a case is Determined, it cannot be re-opened. It is therefore vital that the complaint put to the FOS or CIO is well-constructed in the first instance, to achieve the best outcome for the consumer.