City firms who have customer complaints against them rejected will get a rebate of more than 25%, while claims management companies will be charged for the first time to bring cases to the Financial Ombudsman Service.
The disputes body says that under new rules if a complaint brought by a claims management company, or a professional representative, “is not upheld, or is withdrawn, the financial business against whom the complaint was made will pay a reduced case fee of £475, instead of £650.”
The ombudsman adds that it will begin charging claims management companies who bring complaints on behalf of customers for the first time.
It says these firms, who came to prominence during the payment protection insurance scandal, will be able to bring ten cases to the service for free a year.
But after that, they will be charged £250 a case from April. They will receive a £175 rebate “if the outcome is in favour of the consumer”.
The Financial Ombudsman Service says: “The move aims to make the funding arrangements for us fairer and to encourage professional representatives to submit better-evidenced complaints, considering their merits more diligently before referring them.”
It adds that claims companies were behind around 47% of the cases the body dealt with between April and December last year.
The watchdog settles disputes between financial firms and their customers, after being established by Parliament in 2001.
The move comes a day after the Financial Ombudsman Service unexpectedly replaced chief executive Abby Thomas, with interim chief ombudsman James Dipple-Johnstone.
Dipple-Johnstone says: “We’ve seen more cases brought by professional representatives, but fewer of these cases leading to a better outcome for their clients.
“Currently there is little commercial incentive for representatives to ensure the complaints they bring are well-founded or have merit.
“As a not-for-profit service, we expend our finite resources handling thousands of withdrawn or abandoned cases, which can lead to longer wait times for other customers.”
Finance & Leasing Association director general Stephen Haddrill welcomes the move but added that proposed fees charged to claims management companies should be higher.
Haddrill says: “The introduction of charging is a most important step forward. Claims management companies are major businesses that should not have a free ride, not least because they have driven a compensation culture that damages investor confidence in the UK and threatens growth.
“However, today’s decision on the level of the charge is unsatisfactory and we will continue to call for it to be increased.
He adds: “Professional representatives should be charged on the same basis as lender firms to deliver a fair and equitable approach. And the suggestion that lenders must pay the lion’s share of the case fee even when they are not at fault runs counter to the Financial Ombudsman Service’s aim of applying a ‘polluter pays’ principle.
“We know of no other example where the loser in a case involving two businesses pays less than the winner.”
The disputes body adds that cases brought by individuals, charities, and voluntary organisations will remain free.
Thomas became the fourth head of a regulator to suddenly leave her post after the Chancellor warned of the danger of rep tape stifling growth in the City at her keynote Mansion House speech in November.
Rachel Reeves added that regulations put in place to protect the economy after the 2008 global financial crisis had “gone too far”.
Last month, former Amazon UK head Doug Gurr was installed as interim chair of the Competition and Markets Authority after Marcus Bokkerink left suddenly, after just over two years in the role.
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