17th February 2009

Sander's view

When taking a matter to court, your legal representation has an overriding objective first to the court - not to mislead the court - and secondly to the client.

The FOS only has DISP rules to govern its operation and how complaints are to be handled industry wide. These extend only to what YOU have to do for your client. Not vice versa! What does this mean?

In a court, neither side's legal representation is allowed to ask leading questions such as: when you walked into the room you saw the robber, Chris, and that robber, Chris, is now sat in front of you in court. Isn't that right?

Why is this not permitted?

Because the story has to come from the parties concerned, not their lawyers. Why? Because the lawyer wasn't there.

In our world, claims management firms have 'templates' which clients sign, to make their complaints. Not exactly a legally balanced case by case is it? So the rules in place effectively 'over' regulate all of you, leaving complainants to say and do as they wish, with no possible sanctions or repurcussions.

Why are there no sanctions?

Because FOS and the FSA have to be seen to 'promote' confidence in the industry, and if they do not, one of their main purposes is undermined, and the house of cards will fall.

I would strongly argue that promoting oneself is best achieved when you can be seen to exert great influence over one party to a dispute, leaving he who asserts - or brings the claim - unscathed. Unscathed, in this context, means specifically that:

1. Complainants bear no costs in bringing the complaint
2. They are not penalised for bringing false claims
3. They are not found on any public register, where any disciplinary action is there for all to see
4. They do not have to pay costs, even if FOS finds that they have brought a frivolous and vexatious claim
5. Claims management firms have sprung up in numbers, meaning that complainants do not even have to lose time bringing a claim, further reducing any lost time and money
6. They can still go to court if they disagree with FOS's view, but by starting at the beginning e.g. perhaps a multi track case for recovery of �£15k (if it actually gets to that for an endowment claim, which is often not the case) where the costs are �£250 plus the cost of their legal representation.
7. Under the FOS process, the complainant need only say: I was not warned about the risk, and that is enough. They are not expected to keep any documents dating back 15 years, or provide any proof of what is being said, even though some ombudsman take a 'very' dim view of a firm that has no file after this time - again contrary to ordinary business practice, and the law in this area.

Now let's look at your situation

1. You pay, whether you win or not, at a fee that is mandatory and set by a regulator.
2. If you do something wrong, in line with the FSA's promotion of transparency, you are found on a register and your wrongdoing made evident for all. FOS now want to add to this, by naming and shaming the worst offenders for complaints handling. The question is, what defines an offender - someone who refuses to uphold a complaint just because he/she is told to?
3. If you are found to be handling complaints poorly, you may have to pay a large fine at the behest of the regulator, in addition to the complainant's compensation and the FOS fee.
4. You have all had to learn new trades: complaints handling, since the FSA wasborn in 2001 and run these skills alongside your ordinary 'everyday' job. Those of you that have picked up your new skills well enough to keep pace with FOS have probably lost thousands of pounds worth of revenue whilst attending to these matters, and those of you that have not taken to your new vocation, have probably lost many of your cases and had to pay out more compensation as a result.
5. Because you cannot recover your costs, there are no firms that would entertain no win no fee deals with you, because its pointless e.g. you're alone OR you pay lawyers - with claims quickly, cost effectively and expertly.
6. If you disagree with a final decision, it is inevitably binding - what complainant will turn down an offer of compensation? - you have to pay absolute minimum �£30k to bring a judicial review, which have proven excessively difficult to win, which then leaves you liable to pay the compensation anyway. Top this off with the fact that because FOS works on a 'case by case' basis, one JR applies to that one case.

I am hearing many comments come out of the woodwork about complainants being coached by their complaints handlers. I am also hearing many comments about wanting to know what a frivolous and vexatious claim is. The FOS tells me the industry already knows this, but it is not defined by example, and that the system is not a consumer champion, because you all have access to 'roadshows' where all these things are answered.

Adviser Letter of the Week