From April, professional representatives of customers who wish to make a complaint about a financial service will have to pay £250 to the resolution service. However, the representative will receive a partial refund should the case be upheld in favour of its client.
If the complaint is awarded in the customer’s favour, then the representative can claim back £175.
The new charge will not impact those making a complaint without a representative, which will remain free for everyone in the UK.
This is also the case if a charity, family member or friend takes on the responsibility on behalf of a complainant.
The move could deter CMCs from making mass claims to the ombudsman service for cases that are unlikely to be found in favour of the client they represent.
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Almost half (47%) of all complaints were brought to the FOS by professional representatives, who charge customers for their involvement or take a chunk out of any refund paid by a bank or other financial service that the FOS investigated a complaint about.
As it stands, professional representatives do not pay anything to the FOS to have complaints looked into; that is for financial firms who receive the complaint, and the fee is £650 for every case the FOS investigates.
Cap already in place for fee to clients
The FCA introduced a cap in 2022 on what CMCs could charge clients, which begins at 30% for redress sums under £1,499 and decreases in increments to 15% (or £10,000, whichever is lower) for redress of £50,000 or more.
If the business that the complaint is against wins the case, a reduced fee of £475 is applied.
The introduction of the charge follows a crackdown by the Financial Conduct Authority (FCA) – the regulator of the financial services industry – on CMCs’ unfair practices.
In 2024, the regulator removed 10,000 CMC ads targeting vulnerable customers about raising a complaint about housing disrepair or the mis-sale of motor finance.
James Dipple-Johnstone, interim chief ombudsman at the FOS, said: “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 As a not-for-profit service, we expend our finite resources handling thousands of withdrawn or abandoned cases, which can lead to longer wait times for other customers.”
Dipple-Johnstone also said the move will help the service investigate complaints in a more efficient way, both practically and financially.
‘Poorly evidenced claims is a concern’
Rocio Concha, Which?’s director of policy and advocacy, said: “The support of professional firms can be valuable for consumers’ escalating complaints, particularly for complex issues, but is by no means essential to have a claim upheld by the ombudsman.
“The growing number of poorly evidenced claims brought by professional firms is a concern. The onus should, however, be on the Financial Conduct Authority and relevant legal regulators to hold professional representatives, including claims management companies, to existing requirements and take enforcement action against those that fall short.
“If you do decide to use a professional firm, make sure they are authorised by the Financial Conduct Authority or a legal regulator by searching the relevant register.”
