FOS plans to resolve cases faster with complaints rising

Experts in financial services disputes and investigations, Jonathan Cavill and Anthony Harrison of Pinsent Masons, said the plans set out by the FOS in its strategic plans and budget for 2024-25 are “ambitious” and that the expected increase in its caseload – which the FOS anticipates will hit approximately 210,000 for the year – reflects the financial challenges consumers and small businesses are facing.

The FOS is an independent dispute resolution service that resolves complaints made by consumers and small businesses about financial services providers. It has the power to award compensation against providers where it upholds complaints raised against them. The FOS is funded by a combination of levies and case fees.

According to the FOS, it is carrying 80,000 unresolved cases into 2024-25 from 2023-24 but intends to exit the year carrying 15,000 fewer cases forward. With approximately 210,000 new cases expected – up from the 181,300 estimate it previously thought it would receive when consulting on its strategic plans and budget back in December – the FOS therefore said it expects to resolve approximately 225,000 complaints this year.

To achieve this target, the FOS said it is seeking to recruit at least 400 additional complaints handling staff in 2024-25, upskill existing staff, and improve the efficiency of its service. Service improvements planned include digitising the customer journey and harnessing “the power of intelligent automation”.

Cavill said: “The FOS’s plans are ambitious – particularly when it comes to looking to resolve more cases within shorter timeframes. Given the historic challenges the FOS has faced with excessive complaint resolution wait times, it remains to be seen whether these new targets can be met. This will not just require the recruitment of more case handlers but more investment in technological solutions to assist case resolution. This is something the FOS CEO has highlighted and follows a similar approach to the Financial Conduct Authority (FCA) in its commitment to using more innovative and digitised approaches to investigations.”

Most of the new complaints the FOS expects to receive – 149,200 – are anticipated to arise in respect of banking and consumer credit, with those cases expected to range from disputed transaction cases pertaining to fraud and other scams, to cases about irresponsible and unaffordable lending, account closures, and motor finance commission arrangements, among others.

The FOS said it expects a further 47,400 new insurance-related complaints and 12,800 new investment and pensions-related complaints in 2024-25.

The FOS is targeting the resolution of 90% of all complaints within six months of conversion. It reduced the average time it takes to resolve a case from 4.8 months in 2022-23 to 2.96 months by the last three months of 2023-24.

Harrison said: “Given the ongoing financial pressures that many customers are facing at the moment, it’s perhaps not surprising that there has been an uptick in demand for FOS services. Such economic turbulence often creates the conditions for complaint situations to arise – especially in areas of unaffordable lending, credit cards and motor finance, even with the FCA’s ongoing review.”

“With that increase in demand comes heightened pressure on FOS decision-makers to ensure that speed of resolution is matched with fairness of outcome. This isn’t always an easy balance to strike, and with the arrival of the consumer duty it will also be interesting to see how that factors into decision-making as new and challenging cases percolate through the FOS complaints system,” he said.

The FOS also confirmed plans to reduce the cost of its funding to financial services businesses, including by cutting its levies. It estimates that industry will benefit by over £60 million in real terms from the changes.

The FOS previously sought views on the possible exercising of new powers granted in the Financial Services and Markets Act, which allow it to charge claims management companies and other relevant professional representatives that wish to lodge complaints with it. Following positive feedback on the initial consultation, the FOS said it intends to consult on further detail in the first quarter of this financial year.

“Whilst the reduced cost to the industry of £60m will be welcomed, the benefits of this will, in part, be dependent on whether the FOS’s wider commitment to resolving cases more quickly is actually delivered,” Harrison said. “The incidental costs in having to engage with protracted complaints and the uncertainty this generates can be a significant burden on respondent businesses. Those businesses will also be keen to see how the FOS grasps the nettle of potentially charging claims management companies, as this may also help to reduce costs in the longer term in the hope that fewer vexatious cases are pursued.”