The Financial Ombudsman Service will be given the power to charge case fees to claims management companies which bring cases to it on behalf of clients.
HM Treasury has published a statutory instrument which will give it powers to set the scope of who the Fos can charge fees to. The Fos will then be responsible for making decisions as to who is charged, within the scope of those rules.
As part of this, the Fos is being given the power to charge case fees to CMCs from next year.
Currently the Fos can only charge case fees to respondents to a case, meaning the firms which are subject to a complaint.
The Fos will publish a consultation paper on the detailed case fee rules for CMCs soon and expects to start charging them case fees by the end of September 2024.
A policy statement published by the Treasury said: "The government has heard concerns that CMCs and other relevant legal professionals are able to ‘weaponise’ case fees charged by the Fos to pressure firms into settling claims before they formally become part of the Fos process.
"For example, firms have said they may decide to settle early where the level of redress being sought through the CMC claim is less than the amount the firm would be required to pay through case fees, regardless of whether the claim was upheld.
"The outcomes described are not aligned with the purpose of the Fos, which is to provide for the proportionate, prompt and informal resolution of disputes between consumers and financial services firms, as an alternative to the courts."
Data provided by the Fos shows more than half of cases raised by CMCs and other similar organisations are not upheld, and the Fos reported examples of firms raising volumes of complaints which seem to be templated and poorly evidenced.
This, the Fos says, impacts its ability to help other customers as quickly as it would like.
James Dipple-Johnstone, deputy chief ombudsman at the Fos, said: “We are committed to improving our service so it is as easy to use and accessible as possible, while ensuring it remains free for all consumers and that those with upheld complaints can keep all of any award we make.
“Professional representatives play an important role in resolving financial disputes. However, 20 per cent of cases are brought by representatives, some of whom benefit commercially at scale, yet more than half of such cases are not upheld. It is therefore timely that we explore whether our fee structure is right for the current climate and best reflects the costs we incur in helping resolve disputes for customers.
“We welcome all views from industry and consumer groups on our proposals on whether and how a charging regime might work in practice.”
The rules have been drawn up by the Treasury to exclude charities which submit complaints on behalf of consumers.
