24th May 2011

FOS contractors paid on cases “closed”?

This week MM reported that FOS figures just released show that IFAs made up 1.5 per cent of 206,121 cases in 2010/11, around 3092 cases, compared to 2 per cent of 163,012 cases the previous year, around 3260. The FOS says IFA complaints were skewed upwards for 2010/11 due to a large number of complaints against one particular firm- Towry. A spokesman said Towry had worked hard to resolve the issue according to FT Adviser.

He said: "Whilst the number of complaints has increased, we will always strive to achieve no complaints at all. "However, the numbers represent a very small percentage of our client base, confirming that the vast majority of our clients remain happy with our professional service levels."

Towry received close to 350 complaints in all over the 2010/2011 financial year. In 2010 to 2011 the ombudsman received 349 complaints against the firm, which prides itself on being a wealth adviser and not an IFA. Of these complaints, 345 related to the sale of investment products while four were about life and pensions and decumulation.

If the Towry figures were removed I wonder what the percentage would be?
IFAs accounted for 25 per cent of pension complaints, 14 per cent of investment complaints and 8 per cent of mortgage complaints. This compares with 2009/10 figures that show IFAs accounted for 28 per cent of pension complaints, 12 per cent of investment complaints and 9 per cent of mortgage complaints.

But evidence continues to support the view that all is not well in the regulatory version of “Animal Farm” where clearly IFAs and providers, like the Orwellian characters, see their “Seven Commandments” reduced to a single phrase: "All animals are equal, but some animals are more equal than others." This is especially true regarding the seemingly disingenuous information it provides to the FSA about how it operates.

To assist on understanding what I mean I think we need to go back to the 18th September 2003 and look at John Tiner's report to the FSA board relating to Consumer, Investment and Insurance and the longstop, apologies for the poor resolution.

He states in his report that "after discussions with the FOS, they advised him that they "very rarely" exercise their discretion to look at cases beyond the existing 3 and 6 year time limits, let alone beyond 15 years ago and cases that are looked at are unlikely to exceed three figures each year. Additionally Tiner states that the FOS confirms their experience is that most cases over 15 years ago are likely to be pre A day endowment related complaints which in 2003 was already 15 years ago.

He says the FOS have advised that as a result they have ruled outside of jurisdiction all cases where they believe information was given to consumers more than 3 years ago (2000) as they viewed this as creating sufficient awareness that there was a problem.

Is this actually what is happening and did happen, I suspect not?

Why do the FOS take on cases that an adviser can clearly see and demonstrate as being outside jurisdiction, either on a six and three year basis, 15 year plus basis or where a complaint has been dismissed by a firm that has evidence to defend it's position when the complainant has presented none other than an unsupported, uncorroborated allegation.

It seems from evidence seen by Panacea that pretty much any attempt by a firm to claim a case is outside jurisdiction, for the above reasons, is almost certain to result in the exact opposite with it being brought into jurisdiction by an adjudicator and on appeal by an Ombudsman.

Why do FOS adjudicators seem to embark on “fishing expeditions” where a claim is dismissed but the adjudicator finds grounds for complaint about an issue not actually complained about to be investigated?

It would be cynical person indeed who would think that this is a decision reached out of spite because a firm has dared to object to jurisdiction, so could it be that it is simply a case of revenue generation?

A possible answer as to why this happens may be that the FOS appears to employ adjudicator services from contractors and the contract terms are very heavily weighted in favour of the client- the FOS- in that payment to the contractor is only made on "closed" cases.

In January 2009, Hazel Carr were asking for:

"FOS Adjudicators - London We would be interested to hear from complaint handlers with experience within the FS industry (particularly within banking). The suitable candidates will have excellent investigation and decision-making experience, be process driven, highly organised and committed to this project for the duration. The daily rate is initially �£200 moving to �£140 per case after an approximate 6 week period. Current duration is 5 months with a likelihood of extension. Start Dates are to be confirmed.

Here are some examples of Contractor jobs going back to 2009, I would suspect the situation is not too much different today.

IFAs and indeed providers should think about this in the context of getting say �£140 per closed case?

So, no jurisdiction = no case investigation= no case closed = no fee!!!

How does this fit with the outcome for an IFA where jurisdiction, not result = fee?

This is clearly a conflict of interest.

Here is a sample contract from Hazel Carr, a leading and well-respected contracting firm, section 11.1 and the schedules are of interest.

One should note that there is no clause that prohibits the contracted company and its personnel from acting as or on behalf of a business authorised as a Claims Management Company by the Ministry of Justice? In other words a contracting company could be offering its services to the FOS and to the public in the form of an "ambulance chaser".

If this was happening, one shudders to think of the consequences of a firm wearing "two hats" representing a complainant and then when getting nowhere with it just passing it across to the FOS to investigate.

Two big problems the FOS has, according to our member surveyis that 97% of respondents feel that a claimant should have to produce relevant tangible evidence to support the claim they make before the case can be considered for jurisdiction (currently they do not have to) to bring a case into FOS jurisdiction, and, a staggering two thirds of respondents have experienced false or manufactured claims in an attempt to gain compensation.

Clearly this is not what many would call natural justice. As leading financial services barrister Peter Hamilton states in MM, the FOS is an affront to the rule of law.

The feeling is that no matter how old or "stale" the claim may be, the complainant is always to be believed even though evidence may exist and be available to demonstrate that the exact opposite is true.

This negative view is not enhanced when it is understood that those tasked with investigating complaints are rewarded on cases that are within jurisdiction and closed!

I was sent this recording from a BBC PM programme (click to play)

From the 11th July 2008.

It is a very interesting listen and highly relevant to FOS methodologies because it undermines the idea that complainant's necessarily always have accurate recollection - even if they are not trying to be dishonest.

Finally, Last week, Godfrey Bloom wrote to Natalie Ceeney expressing concern in relation to the organisations conduct regarding a complaint it is handling, it makes interesting reading.

The FOS, in the eyes of many IFAs is broke!

Is there anyone out there with the strength of will and desire to see fair play and the rule of law prevail?

Regulation, Panacea Comment