Why the banks and insurers are terrified

 

If you want the lowdown on every dirty trick ever pulled by the finance industry, there is only one place to go - the office of the Financial Ombudsman Service. And now, for the first time, there are plans to make some of it available to the public. Banks are horrified. Insurers are quaking. But we say - it's about time.

The Silks

With billions of records relating to millions of complaints from ordinary members of the public, the world's biggest Ombudsman service has more dirt on the finance industry than most of us would believe possible. Insurance salesmen who mis-sold pensions and endowments? The Financial Ombudsman Service has vaults of evidence.

Devious investment managers who persuaded elderly widows to pour their savings into split capital trusts? Equitable Life? With-profits and precipice bonds? The FOS has entire wings devoted to these scandals, and much more besides.

The FOS is the biggest scheme of consumer dispute resolution in the world. It is the port of call for consumers whose complaints to regulated financial businesses - and that includes most lenders, banks, insurers, advisers and investment firms - have reached a dead end.

With new complaints and inquiries flooding in at a rate of 2,400 a day - a staggering 630,000 a year - the FOS is operating at record levels.

For some happy FOS users it has been the only way of bringing rogue businesses to account. For others, the hardpressed FOS has been a disappointment, sometimes bungling complaints or taking months, even years, to resolve them. But change is under way.

The FOS is undergoing a major review led by former Tory Minister and lawyer David Hunt. Lord Hunt - he was given a peerage in 1997 - has said anything is ripe for consideration. In particular, he wants to improve access to the FOS and increase the transparency of its work.

One subject on which he is keen - and bank bosses are shuddering at the thought - is to produce some sort of company ranking, based on complaints received or upheld, or both.

'League tables of complaints and outcomes is certainly one area I will look at,' he says. Hunt will also consider changes to the relationship between the FOS and the main City watchdog, the Financial Services Authority.

At present, the FOS will tip off the FSA if its adjudicators pick up patterns suggesting that companies are consistently being unfair. But these conversations are behind closed doors. 'Should this relationship be more open?' he asks.

 

Every week super sleuth Tony Hetherington investigates the darker side of the money business

 

Hunt will also look at whether the FOS, which employs 1,000 and has a budget of £60m, is up to the job. So, are its findings consistent? Are the delays - the FOS says one-third of endowment-related complaints take more than nine months to resolve - acceptable? Why, if the FOS is there to resolve disputes for free, are so many people using fee-charging services to handle their complaints?

The FOS maintains it has adequate resources, but Financial Mail regularly hears of problems that suggests it is creaking under the strain.

A recent incident involved reader Diana Harper, who contacted the FOS after getting nowhere with her complaint against Barclays. Diana, 65, from Portishead near Bristol, believes the bank mis-sold an equity release scheme to her late parents, Edwin and Margaret Silk.

In its response to her initial complaint, the FOS asked Diana to 'arrange for Mr Silk (deceased) to sign' a form. Diana says: 'When I got the letter, I had to laugh. What was I supposed to do - go to the graveyard and dig them up?'

She was jesting, but her confidence in the FOS was shaken. When Financial Mail contacted the FOS about her case, a spokesman apologised, saying he was 'appalled and embarrassed' for a 'clumsy' and 'stupid' mistake. A senior staffer called Diana to say sorry. She accepted the apology and her case against Barclays will now be investigated.

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