Updated May 2017
If you have a problem, if no one else can help, and if you can find them, maybe you can hire the A-Team...
Though if it's with a financial services company, it's easier to complain to the Financial Ombudsman Service (FOS) for free. It can rule, order compensation and even payout for your time on top. This Q&A guide takes you through exactly how to do it.
In this guide
What is the Financial Ombudsman?
The Financial Ombudsman Service (FOS) is an independent official body, established by Parliament, for settling disputes between UK-based financial companies and their customers. Its service is COMPLETELY free.
It has legal power to adjudicate on individuals' complaints or complaints from small businesses and charities with turnover under €2 million (about £1.65 million) and fewer than 10 employees.
If you've ever had a financial product or service, you need to know about the powerful rights all consumers have when dealing with financial companies.
Regulations state these companies must "treat customers fairly". If they don't, the FOS is there to provide a free way to fight back. And while the ombudsman can say you've no case, it won't order you to pay extra costs. So, at worst, you'll be in the same position you were before the complaint.
The service is also not just for new complaints. In many circumstances, you can complain about something that happened up to six years ago. And if you think an old complaint’s been badly dealt with, see the Can I re-open my complaint? section.
How does the ombudsman work?
While the ombudsman has the power to investigate cases, its primary role is actually in settling disputes between customers and companies. These may sound like the same thing, but it can often solve the problem without an investigation.
The ombudsman won't take sides. Its job is to ensure that complaints are dealt with and fair play happens. In a nutshell, the process works like this (there's more info on how you complain below):
You fill in a form. If you’ve already complained to the company and it’s not helped, simply go to the ombudsman's website and fill out a form, or give it a call. You don't need any legal help at all, it's all pretty straightforward.
It puts your case to the company. Once you've made the complaint, it asks the firm what happened, effectively, it asks the company for its side of the story.
Companies can agree. Once the ombudsman gets involved, it's common for companies to just roll over and pay out what they owe to avoid a full investigation.
If there's no agreement, it may carry out a formal investigation. The final decision is based on fairness, to try to ensure the customer hasn't been mistreated. Roughly speaking, it's done on the basis of the 'balance of probability' - in other words, what it thinks is most likely to have happened from the evidence it's given.
Using the ombudsman is a very powerful technique. In many cases, it's cheaper and safer than trying to get a resolution via the courts. More importantly, unlike the courts, which have to rely on whether the company has broken any law, the FOS also follows the regulators' "treating customers fairly" rules. So the ombudsman will make sure you've been dealt with appropriately, not just legally.
You won't get an instant judgment from the ombudsman. Disputes that go all the way can take three to nine months, and longer for PPI complaints. While there's no guarantee you'll win, tens of thousands of people every year do. It means companies must take you seriously.
What can the ombudsman do?
Its range is huge. It doesn't just cover regulated financial activity, but how companies operate in general, to ensure you're being treated fairly.
If you're not sure your complaint is covered, or you just want to find out how to get started with your complaint, it's worth a call to the ombudsman to ask. Call 0800 0234 567 (or 0300 123 9 123 from a mobile). The worst thing that can happen is that the ombudsman tells you it can't adjudicate.
Here are some typical areas the ombudsman deals with:
Historically, the big one has been complaints about bank charges. Yet it also deals with incorrect direct debits, packaged accounts, disputed transactions, cheque clearing and setting off, as well as delays or mistakes in how your account is run.
The main issue's unfair credit card charges. But the ombudsman can also deal with any inappropriate behaviour, such as an unexplained increase in interest rate, disputed transactions, or failing to pay out Section 75 claims, among others.
Debt collection and irresponsible lending
The ombudsman can look at complaints about debt collection companies as well as the lending policies of anyone who holds a consumer credit licence, including payday lenders.
For example, if you feel a lender is harassing you or not treating you properly according to the FCA Consumer Credit handbook, you can complain.
The ombudsman will need to see that you've tried to come to an arrangement with the lender but it'll investigate if you think you've been treated unfairly. Also see the Debt Problems guide for info on how to sort out debts.
Perhaps the biggest category of them all is the dire selling of loan insurance, with possibly £20 billion of mis-sold policies out there (see the Mis-sold PPI guide).
But car, home, travel, and pet policies, roadside assistance, income protection, critical illness and private medical insurance have all moved under the ombudsman's remit. Complaints can be to do with rejected, delayed and unpaid claims, non-disclosure of information and more.
When a firm sells you an insurance product, since April 2013 the onus has been on the insurer to ask you what it needs to know so it can figure out whether the policy's suitable for you. (Before then, you were expected to volunteer this information yourself.)
So if the insurer rejects your complaint, and it didn't ask you the vital questions that'd determine if you were eligible to claim, you can take it to the ombudsman as a mis-selling claim.
For full information what changed in April 2013, see the Insurance law reform MSE News story.
The ombudsman doesn't deal with complaints that are solely about the way an investment has performed. But it can help with many areas to do with with-profits or whole-of-life policies, unit-linked bonds, savings endowments and stockbrokers. It also covers where people are told they're getting low-risk products, but are actually sold risky deals.
Mortgages and loans
This covers a vast range of issues, not just with lenders, but also with mortgage brokers. It includes way lenders handle mortgage arrears problems, or whether a mortgage or loan was affordable when it was first taken out.
A growing number of complaints come from people who feel they have been mistreated by a payday lender. If you've had payments taken unexpectedly from your bank account, don't think the lender properly checked you could afford to repay the loan or it's been harassing you to repay your debt, the ombudsman can help.
It also has a representative in our forum answering your individual payday loan questions (ask the ombudsman a question). Plus see our Payday Loan Alternatives guide for help if you're considering one of these loans.
Pensions and annuities
Complaints can include being wrongly advised to transfer out of SERPS, the suitability of a pension or administrative matters such as delays. But if you have administrative pension problems (involving an employer or trustees, for example), you should go to the Pensions Advisory Service first.
Savings and deposit accounts
A less obvious area of complaint. But the ombudsman can look at ISA applications that aren't processed correctly or on time, what happens to "rollover" savings bonds when they end, or account interest rates not changing in line with base rate changes.
To show you what's possible, here are a couple of success stories.
A payment due from a pension provider had been posted to my previous address (I'd moved since taking it out) and banked in 2000. The company wasn't able to provide details of the account the cheque was paid into so I opened a complaint with the Financial Ombudsman. It settled in full about 3 weeks later with 10 years' interest - a total of £8,219 - and I believe getting the ombudsman involved made a big difference.
I found the ombudsman great. Yes, it takes time, but it's very thorough. It took over a year, but much of the delay was due to Lloyds' determination not to pay quite a large insurance claim. The ombudsman kept me in touch with what was happening and was very professional.
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What does it take into account?
Companies must treat customers fairly and reasonably. But of course, that definition's open to question. Unlike a court, the ombudsman can rule against companies even if they’re acting within the law, as this is not the only source it takes into consideration. The three sources it uses are:
The law of the land
The primary source is the law. If companies' actions break the law, then it’s clear-cut.
Regulators' rules and guidance
The rules of regulators, including the Financial Conduct Authority, also play a key part. If the FCA's indicated how it wants firms to behave and one breaks that, it can be deemed unfair.
Good industry practice
This is the most interesting one, as it allows the ombudsman to define what good practice is.
In most cases, it means the ombudsman will look at any trade bodies' standards, such as the Lending Code. But it can also look at what's seen as common good practice and what would be reasonable in the circumstances of the case. If a particular company goes against that, it can deem its actions unfair.
Until 2007, an example was Section 75 claims for overseas purchases. The law says a credit card company is jointly liable with a retailer if something goes wrong, providing the goods were paid for on the card and cost over £100.
There used to be a question over whether this applied to overseas purchases. While it's since been confirmed by the courts this does apply to all lenders, most of the big firms paid out anyway. Back then, this was deemed “good practice”, meaning that the ombudsman would take this into account when looking at cases against lenders that didn’t.
How do I complain to the Financial Ombudsman?
There's a protocol to follow - but it's very simple.
- First, complain direct to the company
You can't just go to the ombudsman. It'll always want to have seen proof that you tried to settle your dispute with the company first.
It's important to understand that in many cases, a company’s first reaction will be to reject your complaint. This doesn’t mean you’ve no case. It's not necessarily about rights and wrongs, it's about commerce. It's cheaper to say no, produce a legalese argument to befuddle you, and hope you’ll cower in a corner.
So expect a rejection and don’t be phased by it one jot. To help you remember your rights, we've penned a wee poem to help you remember...
- Then, complain to the Financial Ombudsman
If your bank won't help, or you have to wait eight weeks and haven't heard back, you can then go to the ombudsman. It can help sooner if your bank has sent you a rejection letter suggesting you use the ombudsman.
To start your complaint, fill in a form at the Financial Ombudsman Service website or call 0800 0234 567. If you're not good at form-filling, or English isn't your first language, the ombudsman can take you through the process and/or find an interpreter.
You can either fill in the complaint form online or print out a copy and post it back to explain your case. Attach any evidence if you have it (this could be statements detailing charges, or your correspondence with the lender). Then leave it with the ombudsman. It'll contact you if it needs more information or has any possible resolutions. Remember, though...
The essence of the complaint, and what remedy you want, should be clear and obvious.
FOS form-filling help
The form's simple to fill in, but take care doing it. We've written a guide to help, which takes you through filling it in, step by step. It's written in Microsoft Word, so you can easily cut and paste sections of it, and/or print it out, and have it next to you as you're filling in the form.
How far back can I complain?
The good news is you’ve a right to go back a number of years. So if you think you’ve been hard done by in the past, dig out your paperwork and put a complaint in.
Yet the ombudsman can only help with complaints about companies regulated by the FCA. While this doesn't affect most banks and building societies, some insurance providers, for example, were not regulated until 2005 or 2008. If in doubt, check with the ombudsman.
If it's covered, the key rule is you’ve EITHER three years from when you knew you could make a complaint, OR six years from the event you're complaining about taking place.
You also need to contact the ombudsman within six months of your last contact with the firm (remember, you need to have complained to the firm first). Outside this timeframe, you'll need to start your complaint from scratch, which means it's back to the lender.
But, in this latter case, there's a chance the ombudsman may not be able to help if you need to refer your case to it later on, so try not to miss the deadline.
In some cases, it’s clear-cut
For instance, with mortgage endowments, you get a dated 'red letter' when your insurance company knows there will be a shortfall. This warns you your mortgage might not be covered by the investment. If you took out the mortgage endowment over six years ago, that red letter will start the three year rule (although for endowments your lender should also have written to tell you about the time limit at least six months before it expired).
If it's not clear-cut, use the best option for you
In other cases, this can be a grey area. Let's say you want to complain about your APR getting raised by your credit company. Did the clock start ticking when the rate was altered, when you got your statement, or when you knew you could complain about it, which could have been months or years later?
If the rate was raised in the last six years, then you're covered. If the rate was raised more than six years ago, you need to be able to show that you didn't realise there was a problem until up to three years ago, otherwise you’ll be out of time.
So as long as it's honest, work this through to your advantage. Pick the time when you first realised you could complain about your treatment and you'll be fine. Ultimately, the ombudsman will decide if it's in time or not.
Can I re-open my complaint?
Each time you complain, a financial company needs to give you a final response. This response must mention the ombudsman's free service, and it can get in trouble if it doesn't. In 2011, RBS and NatWest were fined for not doing this (see MSE News).
If you don't get a final response, or it doesn't mention your right to use the ombudsman within six months of its letter, your timeframes are extended.
In this case, you’ve three years from when you knew you could make a complaint, OR six years from the event you're complaining about taking place.
If you're still within these timeframes and would like to pick up a complaint where you left off, simply contact the ombudsman and ask it to take on your case. The Complain to the Financial Ombudsman section above includes links to the forms and a free guide to filling them in.
If you're re-opening your complaint, we suggest you include any original letters you still have, and mention that fact in the ‘any other details’ section on page three of the form. Here’s some suggested text to help:
Can I charge for the hassle it's caused?
The ombudsman awards compensation for material distress and inconvenience in about a quarter of the cases it looks at.
You can charge for your time. Hidden in its compensation guidelines, it states it will award compensation for the time you've spent resolving your complaint. However it won't usually award this as an hourly or daily rate. Instead it will take into account the overall impact the time spent has had on you.
This is great news if you've unfairly experienced problems due to your bank or finance company, as the ombudsman officially recognises the time you spend rectifying the issue is worth something.
So when you do complain to the ombudsman, if you've spent significant time and hassle going through the process, be sure to include an estimate (or if you've got it, proof) of the hours you've spent chasing the issue, and ask for compensation according to its guidelines. You won't always get it - but you're much more likely to if you ask for it.
You could go one step further and use this as a stick to hit an unhelpful company straight away. The compensation guidelines only officially apply for complaints resolved by the ombudsman. But when you complain to the company, indicate you'll be asking the ombudsman for compensation. It may help make it settle.
What can I do if I think the ombudsman is wrong?
The Financial Ombudsman Service's decision is usually made by an assigned case worker. If you disagree with the result you can ask for a formal decision to be made by one of the actual ombudsmen at the service. This usually takes several months as it involves a detailed investigation into your case.
Fewer than one in 10 cases end up with an ombudsman, and some of those are there because the finance company has requested it. After the ombudsman's decision, there is no further appeal process.
After that, while the finance company must accept the ombudsman's decision, you still have the right to take the company to court.
Think carefully about this. While the ombudsman can decide purely on fairness, a court will only rule based on legal wrongdoing. For information on how to make a small claim for up to £10,000, see our Small Claims Court guide.
If you feel the ombudsman hasn’t handled your case correctly - perhaps there were unnecessary delays - you can go to its Service Review Team. If that doesn’t resolve it you’ve a right to go to the Independent Assessor. But this can only about be quality of service you've had, not about the ombudsman's actual decision.