The Financial Ombudsman Service (FOS) has announced that it will charge professional representatives £250 to refer a case to its service from 1st April.
Currently financial services firms pay a £650 case fee for complaints against them that FOS investigates, while professional representatives do not pay a case fee.
Between April and December 2024, around 47% of complaints submitted to FOS were from professional representatives, who either charge consumers or take a percentage of any redress awarded.
The Ombudsman says the professional status of these firms should mean that these complaints have a "considerably higher success rate", compared to consumers who use the service without professional representation. However, only 26% of cases brought by professional representatives were found in favour of the consumer, compared to 38% of those brought directly by consumers for free.
FOS therefore plans to charge professional representatives £250 to refer a case. They will be able to bring ten cases to the service for free each financial year. After that, every subsequent case they refer will be chargeable. They will receive £175 back in credit if the complaint is found in favour of the consumer they represent, reducing the charge they pay to £75.
Under the new rules, if a complaint referred by a professional representative is not upheld or is withdrawn, the financial business against whom the complaint was made will pay a reduced case fee of £475, instead of £650.
FOS says the move aims to encourage professional representatives to submit better-evidenced complaints, considering their merits more diligently before referring them.
It will remain free for consumers to refer a complaint themselves, and for charities, families and friends who may be helping them.
James Dipple-Johnstone, interim chief ombudsman at 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 As a not-for-profit service, we expend our finite resources handling thousands of withdrawn or abandoned cases, which can lead to longer wait times for other customers.
"The charges we are introducing from April will bring better balance to our fee model, helping us to resolve disputes quickly and ensuring a wider contribution towards our running costs.
"Professional representatives can play an important role in resolving financial disputes by providing high-quality, good value services to those people who make an informed choice to employ them.
"But it is important for consumers to know that it is and will remain free for them to bring a complaint directly to our easy-to-use service, and those who do so can keep all of any reward we make.”
Baroness Manzoor, chairman of FOS, added: "I believe this marks an important and significant milestone in the financial services landscape, enabling us to continue our vital work in resolving disputes for both complainants and firms quickly and with minimum formality.
"We will continue working closely with all stakeholders to ensure a smooth transition and to support CMCs and other professional representatives throughout this process.”
However, Stephen Haddrill, director general of the Finance & Leasing Association (FLA), says the amount charged is "unsatisfactory". He explained: “The introduction of charging is a most important step forward. CMCs are major businesses that should not have a free ride, not least because they have driven a compensation culture that damages investor confidence in the UK and threatens growth. However, today's decision on the level of the charge is unsatisfactory and we will continue to call for it to be increased.
“Professional representatives should be charged on the same basis as lender firms to deliver a fair and equitable approach. And the suggestion that lenders must pay the lion’s-share of the case fee (£475) even when they are not at fault runs counter to FOS’s aim of applying a ‘polluter pays’ principle. We know of no other example where the loser in a case involving two businesses pays less than the winner.”
