Category: Complaints

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Financial Ombudsman Service announces change to compensatory interest levels

Earlier this week, on 15 July 2025, the Financial Ombudsman Service (the Ombudsman Service) published a press release and a policy statement, following a consultation, setting out its decision to change the level of compensatory interest it awards where it upholds a complaint.

The key changes will be:

– If a complainant can show actual loss, their actual loss will be considered when making the money award so that the complainant “is restored to their original financial position”;

– To compensate a complainant from being kept out of their money, the Ombudsman Service will continue to award compensatory interest. But instead of awarding 8% a year, it will award “a time-weighted average of the Bank of England base rate plus one percentage point” and this rate “will generally apply to the period from when the complainant was unreasonably deprived of the money, to the payment deadline” set by the Ombudsman Service; and

– If a firm fails to pay any award by the date set out in the award, a rate of 8% will be used after the deadline date for payment until it is actually paid.

The Ombudsman Service proposes to implement these changes from 1 January 2026 (but the implementation date will be confirmed “in due course”).

This is a significant step forward and re-balances what has always been a penal rate awarded by the Ombudsman Service. In 2018, I wrote a case report in Goode: Consumer Credit Reports on Carrasco v Johnson [2018] GCCR 16001 saying that the Ombudsman Service had “developed a practice of awarding interest at 8% a year” and submitted that practice was flawed because there was “no clear legal basis for the FOS to award interest at 8% a year which, given the base rates, is likely to punish firms who are required to provide redress”. I said that decision should force “a re-think of the FOS’s current policy of awarding interest at 8% a year”. Seven years on, such a re-think has finally happened and cannot be implemented a moment too soon.

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FCA issues statement on its next steps in its motor finance review

Earlier today, on 11 March 2025, the UK Financial Conduct Authority (the FCA) published a statement on its next steps in its motor finance review. The FCA says:

– If, taking into account the Supreme Court’s forthcoming decision on the appeal from the Court of Appeal’s decision in Johnson v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance [2024] EWCA Civ 1282, it concludes motor finance customers have “lost out from widespread failings by firms, then it’s likely we will consult on an industry-wide redress scheme“;

– Under a redress scheme, “firms would be responsible for determining whether customers have lost out due to the firm’s failings. If they have, firms would need to offer appropriate compensation. We would set rules firms must follow and put checks in place to make sure they do“;

– The FCA no longer plans to make a further announcement in May 2025. Instead, the FCA will confirm its position “within 6 weeks of the Supreme Court’s decision if we are proposing a redress scheme and if so, how we will take it forward“; and

– The FCA’s next steps on non-discretionary commission arrangements will also be informed by the Supreme Court’s decision.

There are some interesting points from this statement:

– The statutory test under Section 404 of the Financial Services and Markets Act 2000 refers to it appearing to the FCA “that there may have been widespread or regular failure by relevant firms to comply with requirements applicable to the carrying on by them of any activity“. The FCA’s statement that it may (depending on the circumstances) consult on such a scheme is therefore a simple re-statement of part of the test for a consumer redress scheme under the statutory provisions.

– It is unsurprising that the FCA will not make an announcement in May 2025: this seemed inevitable once the lenders were given permission to appeal by the Supreme Court in December 2024.

– There is no mention of the appeal to the Court of Appeal from the High Court’s decision in R (Clydesdale Financial Services Limited) v Financial Ombudsman Service [2024] EWHC 3237 (Admin). This has a ‘hear by’ date of 8 December 2025 and the Court’s consideration of the FCA’s rules and guidance in the Consumer Credit Sourcebook must (it is submitted) be part of the FCA’s wider consideration of whether there has been “widespread or regular failure“.

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FCA proposes to extend the time firms have to handle motor finance commission complaints

Earlier today. on 21 November 2024, the UK Financial Conduct Authority (the FCA) published a press release and a consultation paper setting out its proposals for further changes to complaint handling rules for motor finance commission complaints.

In broad terms:

– the FCA proposes to extend its current rules in DISP Appendix 5 to motor finance non-discretionary commission arrangement (or a DCA) commission complaints;

– the FCA is consulting on two proposals meaning there would be a pause for issuing a final response letter on a non-DCA motor commission complaints to either (a) 4 December 2025 (to align with DCA motor commission complaints) or (b) 31 May 2025;

– the FCA says it will set out its next steps on discretionary motor finance commission complaints in May 2025 and proposes to set out its position on non-discretionary motor finance commission complains at the same time (as it believes that the Supreme Court will have made a decision on whether to give permission to appeal in Johnson v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance [2024] EWCA Civ 1282 by then); and

– the FCA proposes to extend the time to refer a complaint about a non-DCA motor commission complaint to the Ombudsman Service until the later of 15 months from a final response letter, or 29 July 2026.

The deadline for responding to the consultation is 5 December 2024. It is likely that new rules and guidance will be made shortly afterwards.

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FCA consults on further pause for handing motor finance discretionary commission arrangements

🚨 Earlier today, on 30 July 2024, the FCA published a consultation paper entitled ‘CP24/15 – Extending the temporary changes to handling rules for motor finance complaints’ and a press releaseproposing to extend the current pause to the time that firms have to respond to motor finance complaints about discretionary commission arrangements.

📆 The FCA says it proposes to set out its next steps in May 2025 (and not September 2024).  By then, the FCA says it’ll have analysed: (a) the data it has collected from motor finance firms and (b) the outcome of Barclays’ judicial review of the Financial Ombudsman’s decision to uphold a DCA complaint.

✋ The proposed pause to 4 December 2025 will allow the FCA to (for example) consult on a redress scheme or ask firms to deal with motor finance complaints relating to discretionary commission models.  Firms will not be required to respond to such complaints before 4 December 2025.

📝 The FCA also proposes to give consumers until the later of 29 July 2026, or 16 months from the date of their final response letter, to refer any complaint to the Financial Ombudsman Service.

👨‍💻 The deadline for responding to the consultation is 28 August 2024.

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FCA publishes findings of multi-firm review into insurers’ valuations of vehicles

On 27 March 2024, the UK Financial Conduct Authority published its findings into its review of firms’ claims-handling processes for valuing vehicles which have been stolen or written-off (often called ‘total loss’ claims).

Some of the key points are:

– Firms must deal with total loss claims promptly and fairly and in line with their obligations under ICOBS 8.1 leading to firms “identifying a fair estimate” of a vehicle’s market value.

– valuation of vehicles:

* The FCA found some good practice including firms offering settlement values closely aligned to retail prices and the firms used the same guides for valuations as the Financial Ombudsman Service.

* The FCA found some areas for improvement including examples of firms offering values lower than available guide prices, firms making deductions based which could lead to unfair customer outcomes and making ‘initial offers’ which are not the firms’ best offers.

– communicating an initial offer:

* The FCA found good practices of initial offer communications clearly explaining the settlement offers and such offers giving customers an opportunity to give additional information relevant to valuation.

* The FCA found some areas for improvement including ensuring communications do not dissuade customers from challenging valuations.

– handling disputed valuations:

* The FCA found good practices of firms allowing customer to provide additional information relevant to valuation and, where a customer rejects a revaluation, most firms treated such challenges as a complaint.

* The FCA found some areas for improvement including not discouraging customers from disputing valuations and not having enough MI to show that a revaluation did not result in systematically different outcomes for customers.

– outsourcing: the FCA found several areas for improvement including: (a) having better oversight arrangements, (b) better managing conflicts of interest and (c) ensuring that outsourcing did not lead to systematically different customer outcomes.

– treatment of policies after a claim settlement:

* The FCA found some good practices including most firms giving customers the opportunity to substitute a vehicle on the policy for the rest of the term.

* The FCA found some areas for improvements including firms requiring customers to pay the remaining premium from the settlement rather than allowing customers to continue making monthly payments of the premium.

– management information and data collection: the FCA found areas for improvement including (a) collecting basic data on total loss claims, (b) monitoring the average deviation between vehicle valuations and guide prices and (c) demonstrating that appropriate MI was collected and analysed to ensure different approaches do not lead to systematically different customer outcomes.

Insurance firms, and third parties providing insured valuation services, will need to quickly digest the FCA’s findings and make changes (where relevant) with a clearly documented rationale for any steps taken by them. The FCA is likely to pick up all of these themes in any future engagement with such firms.

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FCA urges Claims Management Companies and High Cost Lenders to work better together

On 31 March 2021, the UK Financial Conduct Authority published a news story encouraging claims management companies (‘CMCs’) and high cost credit lenders (‘HCC lenders’) to work better together.

The FCA is aware of:

– some CMCs having presented a claim to a HCC lender where the customer had never taken out a loan with them;

– some HCC lenders suspending lending whilst the complaint is being investigated;

– some CMCs using ‘catch all’ letters of authority; and

– some HCC lenders being unwilling to share information efficiently.

The FCA has reminded CMCs that:

– they must not make or pursue a claim if they have reasonable grounds to suspect the claim does not have a good arguable base or is fraudulent, frivolous or vexatious;

– they should take “all reasonable steps to investigate the existence and merits of each element of a potential claim” before making or pursuing a claim; and

– their investigations should enable them to make representations when presenting a claim which: (i) substantiate the basis of the claim; (ii) relate to the nature of the claim and are specific to the claim; and (iii) are not false, misleading or an exaggeration.

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Financial Ombudsman Service publishes latest edition of ‘Ombudsman News’

On 28 October 2020, the Financial Ombudsman Service (the Ombudsman Service) published its latest edition of ‘Ombudsman News’.

This edition includes:

– a blog setting out how it is ‘helping small businesses with life-changing financial disputes’;

– a blog on the impact of COVID-19 on financial services complaints and SMEs; and

– the Ombudsman Service’s half-yearly complaints data (including a slight increase on the number of non-PPI complaints received in the last reporting period).

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UK Supreme Court to consider RyanAir’s decision to pay compensation directly to a complainant and not to a law firm

On 27 October 2020, a panel of five Justices of the UK Supreme Court will hear the appeal of law firm, Bott & Co, against the Court of Appeal’s decision that the law firm had no equitable lien for fees over any compensation paid directly to a complainant.

The UK Supreme Court’s decision may have an impact for consumer finance firms receiving complaints from law firms, or claims management companies, on a complainant’s behalf.

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Financial Ombudsman Service publishes latest edition of ‘Ombudsman News’

On 5 June 2020, the Financial Ombudsman Service (the Ombudsman Service) published its latest edition of ‘Ombudsman News’.

The Ombudsman Service sets out things it will consider when looking at:

– claims by customers under Section 75(1) of the Consumer Credit Act 1974;

– complaints by customers in financial difficulties;

– complaints about motor finance agreements (including expecting businesses to “listen and proactively look for signs of financial difficulties“, expecting firms to be “even more flexible in their forbearance measures” and expecting firms to “fully inform consumers of their options to exit the agreement where necessary/appropriate“); and

– complaints about mortgages.

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FCA updates webpage for firms dealing with complaints during COVID-19

On 7 May 2020, the UK Financial Conduct Authority updated its webpage for firms dealing with complaints during COVID-19. The webpage suggests firms should “take all reasonable steps to ensure as much complaint handling as possible continues through staff working from home, where this can be done fairly and effectively”. But the FCA warns claims management companies should allow firms “a reasonable amount of extra time, beyond 8 weeks, to give a final response before referring complaints to the Ombudsman Service”.