Financial Ombudsman losing it?

I appeared on “You and Yours” (Radio 4) today at 12.35 with an official from the Financial Ombudsman Service, after I coauthored a FIPR submission to a review of the service which is currently being conducted by Lord Hunt.

Our submission looks at three cases in particular in which the ombudsman decided in favour of the banks and against bank customers over disputed ATM transactions. We found that the adjudicators employed by the ombudsman made numerous errors both of law and of technology, and concluded that their decisions were an affront to reason and to justice.

One of the cases has already appeared here on lightbluetouchpaper; the other two cardholders appeared on an investigation into card fraud on “Tonight with Trevor MacDonald”, and their case papers are included, with their permission, as appendices to our submission. These papers are damning, but the Hunt review’s staff declined to publish them on the somewhat surprising grounds that the information in them might be used to commit identity theft against the customers in question. Eventually they published our submission minus the two appendices of case papers. (If knowing someone’s residential address and the account number to a now-defunct bank account is enough for a criminal to steal money from you, then the regulatory failures afflicting the British banking system are even deeper than I thought.)

The Financial Ombudsman Service, and its predecessor the Banking Ombudsman, have for many years found against bank customers and in favour of the banks. In the early-to-mid 1990s, they upheld the banks’ outrageous claim that mag-stripe ATM cards were invulnerable to cloning; this led to the court cases described here and here. That position collapsed when ATM criminals started being sent to prison. Now we have another wave of ATM card cloning, which we’ve discussed several times: we’ve shown you a chip and PIN terminal playing Tetris and described relay attacks. There’s much more to come.

The radio program is online here (the piece starts 29 minutes and 40 seconds in). We clearly have them rattled; the ombudsman was patronising and abusive, and made a number of misleading statements. He also said that the “independent” Hunt review was commissioned by his board of directors. I hope it turns out to be a bit more independent than that. If it doesn’t, then consumer advocates should campaign for the FOS to be abolished and for customers to be empowered to take disputes to the courts, as we argue in section 31-32 of our submission.

34 thoughts on “Financial Ombudsman losing it?

  1. Great stuff as always, Ross. With chip and pin came a definite attitude of “this stuff is technical, so unlike the old signature method, all losses are now all your fault, dear customer”

    It’s always reassuring to read that some proper research is still being done to show that this is not the case, and technology just makes the problems hardly to understand, but not necessarily harder to abuse. Especially when “the good guys” aren’t being made aware what the exploits are, and how to best prevent them.

  2. Public confidence is lost with the ombudsman in my case. Terrible and now typical it would appear. Justice and reason, sounds like some basic legal awareness is needed within those bodies that are meant to protect us, or at least be impartial and just.

    Unhappy, again.

  3. Good work. I heard the radio program at the time, and I also picked up on the “independent” review being commissioned by the FOS. The one good thing he said was that he acknowledged that no system gives a 100% guarantee of security.

    However, he then neatly sidestepped the huge questions over a lack of technological / legal knowledge on their part, by just saying “each case is different”. Which doesn’t answer the specific questions at all. He didn’t even accept that the FOS had any shortcomings in their approach in any of their cases.

    History seems to be repeating itself. As long as these issues are externalities to UK banks we won’t get better security.

  4. I have difficulties in believing that, such organizations do actually exist in the so-called modern world, but when i know how powerful is the financial world and its links within the political spectrum, i understand while the common man like us got to be sacrifice. But thank heaven we got guys like you Ross and other who still believe in the name of integrity.

  5. Good article. I listened to the You and Yours item yesterday, and yes, it did indeed appear that the ombudsman gradually severed his connection with reality as the interview progressed. I just hope that we get some test cases going the right way before many more people become fraud victims due to such administrative arrogance.

  6. Interestingly, all parties in the cases provided did not challenge the authenticity of the card used in the withdrawal.

    Surely, it should be expected that the Banks (and FOS) have to prove that the original copy of the card must have been used (and hence with some knowledge of the cardholder). Alternatively, the complainants should have evidence that all elements of the card are clonable in addition to the issue of ‘yes-cards’ – another non-contested point.

    But I’m sure all this is more easily said than done, especially in the regimes on display here.

  7. That was a very revealing interview from the FOS representative. I was especially surprised at the admission that they decide on a customers guilt based on procedures, evidence and criteria which are not disclosed to the public or complainant. I had hoped secret courts were going out of fashion given their abuse in the past — sadly it appears not.

    The claim that the FOS’s “funding comes in effect from the financial services authority” is also intriguing. It appears to directly contradict their March 2007 statement:

    who pays for the ombudsman service?
    The Financial Ombudsman Service is paid for by levies and case fees which businesses covered by the ombudsman have to pay by law. At the time the ombudsman service was set up, parliament decided that consumers should not be charged for bringing a complaint to us.

  8. Not only banks, I believe the Ombudsman Service is equally prejudiced in favour of automatically defending the Insurance Companies, acceptiing their word without investigation, and even continuing the same view after proved wrong.

  9. Is regulatory capture as common in the UK as it is in the US? If this ombudsman became a regulator after a long career in the industry over which he now makes decisions, it might explain (but not excuse) a thing or two.

  10. What a complete waste of time the Ombudsman is, you do know that they have ‘Members’ don’t you? All the banks and the Insurance Co’s are ‘Members’ A damm good complaints dept, payed by the tax-payer. Your complaint unless its a few quid almost always gets rejected. NOT WORTH THE TROUBLE. They are there for appearances sake to make us think we are going to get a fair shake. NOTHING IS FURTHER FROM THE TRUTH.

  11. Just one more word of advice.Avoid HSBC Insurance (Ireland) like the plague. They employ ‘bully boys’ Davies (loss adjusters) to help them avoid paying out.

  12. FOS have certainly lost their mind but not in the favour of the financial industry as you claim. Quite the opposite. At the moment the secured loans brokers are in a state of shear panic as FOS has asked all accusations of PPI mis-selling to be paid out without contest – they refuse to back anyone. That means the broker – regardless of whether they were guilty of mis-selling has to pay back the entire policy amount and not just the commission they got off it. The lender doesn’t pay anything, nor does the insurance company. It’s only the broker that foots this bill.

    What consumers and FOS fail to realise is that most brokers aren’t big banks. They haven’t the billion pounds of reserves to protect them. Some brokers are little more than family-run businesses. So across the country there’s a huge number of brokers having to lay off their staff as each claim can be as high as £12k and after just a few of those they’ll crumble.

    FOS is doing this to protect its own image and it needs a scapegoat to flog. Brokers are a soft target.

    Ultimately the consumer loses out as the level of choice diminishes and the only ones who survive are the big sharks who they wanted to attack in the first place.

    So when you’re all attacking the industry wanting your pound of flesh: Try to realise there’s human beings behind it at all levels. Over 20 people got laid off at our broker – I was one of the lucky ones. We don’t mis-sell and if we were allowed to contest the cases we’d win but with FOS declaring open season on us we’re gonners.

  13. I believe the Financial Ombudsman Service lost it a long time ago. Were you aware that this ‘Service’ is not a Public Authority and therefore is not subject to the Powers, Fairness and Transparency of the ‘Freedom of Information Act?’ The FOS investigated a case that was based on my Company; ME the Director and Complainant. I applied for a Commercial ‘Business’ Loan and the bank agreed to lend, following credit-checking of director and Company. The bank stated it will take 5-weeks to complete. Instead, their procedure took 5-months. Of course, this proved financially detrimental to my Company start-up and as a result it could not trade. As a Complainant, I took my case to the FOS who investigated and sided with the bank. It was obvious that the FOS did not request or acquire information from the bank (Firm) as it would of confirmed that the bank did in fact agree to lend at the period we stated. Now, I cannot get ALL the information that the FOS used to conclude my case as the Freedom of Information Act does not apply to them. This is Outrageous! How can they not be ‘Subject’ to this level of transparency and Fairness? The FOS should scrapped and, instead, public money should be used to provide the tax payer with a Fair, Honest and Tranparent system. As a result of the banks failings, I have lost my business. Again, it seems like the ‘systems’ that govern us are failing us.

  14. I am slightly concerned after reading many of these articles; I have currently a complaint going through the FOB, and has now been running for a year. The basics are that the bank gave an incorrect settlement figure to our solicitor when we were changing lender the capital sum of £1900.00 this allowed the bank to take a second charge without our knowledge when we went to sell the house 5years later the sum had grown to over £19k we had to pay £14k to get out of it. We never knew anything about this or even given a letter to state this. Solicitor claims he did what he was asked, bank says we should have known..Dont know what to do after reading the blogs on this site.

  15. I don’t understand why Ross Anderson says “consumer advocates should campaign for the FOS to be abolished and for customers to be empowered to take disputes to the courts”.

    Consumers can already take their dispute to court if they wish, instead of using the ombudsman. Why would consumer advocates want to campaign for consumer options to be reduced??!

  16. The reason normal people can’t sue banks is because of UK costs rules – the loser pays the winner’s costs. This means you risk your house if you go to court. As a result we’ve seen the emergence of dozens of kinds of alternative dispute resolution, and in the case of banking these are simply unsatisfactory: the banks have captured them.

    In the USA, where each party to a lawsuit pays its own costs regardless of the outcome, consumers get a much better deal.

  17. Excellent work! Has there been any progress in the refunding of the ‘ghost’ transactions to the people featured in your submission?

  18. I’m not sure anyone posting here hasn’t an axe to grind….just a few points to restore some sort of objectivity:

    1.Journalists have their own ultimate interests at heart – even good ones – that is to sell news!!! Surprised to see integrity mentioned in the same sentence as the word ‘journalist’!

    2. In most court cases, the case is decided on the basis of the evidence presented to it by both parties. You will not find a court doing any ‘investigations’ itself. Britain does not have an ‘inquisitorial’ legal system. No difference then in that regard.

    2. Financial services businesses do not ‘own’ the FOS because they are ‘members’. All that means is that under law in this country (Financial Services and Markets Act) all financial services businesses carrying out regulated activities (and certain others) have no choice but to pay a fee every time a customer takes a complaint to the ombudsman. Can’t help but think they probably aren’t too happy about that, especially as it’s about 0.5K every time!!!!!! That could be for a complaint that gets the customer a coupla hundred!

    3. As I understand it the reason the FOS can’t give out the information either side sends in to the other party is that it is an alternative dispute resolution service – Data Protection law would have a bit to say about information being passed over willy nilly if it contains individual’s information (which of course it often would). You may be interested to note that courts don’t provide transcripts even when you were present unless you can afford tens of thousands of pounds. If you want your info from a financial services business do a data subject access request. This pretty much works for the knid of small businesses that can make complaints to the FOS, because although a business can’t make a data subject access request as a business, the individuals in the business can request all information held by the financial services business which also contains information about them personally. That is usually most information. The Information Commissioner’s Office can help with this if financial services businesses won’t play ball.

    The FOS were set up as an alternative dispute resolution service to the courts, costs consumers nothing, and they aren’t obliged to accept the outcome FOS reaches! Businesses pay fees each time a complaint goes to the FOS and pay an annual fee as well, and are obliged to comply with an ombudsman’s decision unless they can apply for judicial review. These can only be successful if the ombudsman hasn’t properly followed its own processes so that doesn’t pose much of a threat….

    Oh and for what it’s worth, it seems that noone likes ’em unless they have benefited from their intervention. I think that probably means they’re doing a pretty good job on the whole!!!

    I admit I haven’t listened to this broadcast, so this is just facts. Will listen to it as soon as I get a chance, sounds interesting…….

  19. I send comment a year after this blue touch paper was posted and after Lord Hunts deliberations about the FOS.
    From my perspective NOTHING has changed although at a puch I would say the attitude of the FOS toward the public is worsening (certianly in my case) the correspondence borders on the insulting.
    It is apparent that the FOS FSA banks and all other Financial Institutions are above the law.
    Now where did I put that shotgun

  20. This article is exceptionally dangerous to consumers.

    I quote, “The Financial Ombudsman Service, and its predecessor the Banking Ombudsman, have for many years found against bank customers and in favour of the banks.”

    You’re absolutely right, but the FOS also finds in favour of the consumer on many occasions. That’s what’s meant by impartial. I think it’s worth noting that organisations such as the FOS are not “consumer champions” (who are for the most part underinformed buffoons who do nothing but stoke the fires for their own personal gain). An ombudsman is an impartial platform to give an unbiased view of a complaint.

    Not every complaint brought to any ombudsman service has merit. Sometimes, shock horror, the consumer is actually wrong, and is complaining for the sheer sake of it. Other times they have been through a horrible situation, however it’s only a perception that it’s the fault of a financial institution.

    Why on earth do people like Mr Anderson persist in giving people false hope. The hand of justice falls in both directions..

  21. The Hunt Review web site has removed the evidence it received from the public and others. My evidence was part of this so I have published it again on my own web site.

    If anyone would like to know what really happens when an ordinary person takes a case to the FOS, please take a look at this web site. Sorry its so long.

  22. Sorry, messed up previous post

    The Hunt Review web site has removed the evidence it received from the public and others. My evidence was part of this so I have published it again on my own web site.

    If anyone would like to know what really happens when an ordinary person takes a case to the FOS, please take a look at this web site. Sorry its so long.

  23. What a load of moaners! it is people like this that clog the FOS up for the truly needy.

    Having gone through their complaints process myself and having a relative that works there I can truly say the work they do is excellent and mainly thankless. He has told me of the times they uphold complaints in the favour of the customer – do they get a thankyou? No, just more whinges that the compensation is not enough!!!

    Generally if a complaint has merit the bank will seek to resolve it in-house – therefore it stands to reason that a higher percentage of cases passed to the FOS will lose.

    They are not there to pay out large sums (I have been told of the silly sums asked for for really minor incidents) but to put right what has gone wrong. People have too high views of their “rights”. The banks fully fund this service making free to these people.

    If your case is that good and the FOS has wrongly rejected it – go to court. Its amazing the people who say they have an excellent case but will not put their money where their mouth is!

    He has told me some of the things people complain about (generically of course to protect personal information under the DPA) and I was shocked. The customer (not the bank) sets ae DD up wrong which causes the wrong payment to be made, therefore incur charges etc. The bank, as a gesure as it is a long standing customer, offers to refund the charges etc. However that is apparently not enough – the customer wants compensation – WHY? IT WAS THEIR MISTAKE, NOT THE BANKS???

    We just, unfortunately, live in a compensation society now where people just want something for nothing. If these timewasters stopped clogging up the system then the truly needy and with merits cases would be looked at quicker – and possibly with more sympathy and less jadedness.

    The fact is, a lot of people lie to get “free” monty – and when they are caught out they lie more. I am willing to bet that a fari few of the stories about people losing probably aren’t the truth about what actually happened – however the FOS does not go running to the press with the real truth. Maybe if it started to do so then we would really find out whether these complaints are warranted or not.

    1. I have to say in most cases the Ombudsman will side with the institution. They do not understand legal procedures and do not follow them and they make numerous mistakes. They will not consider anything you provide as evidence and will believe anything the institution says.

  24. The UK has an obligation, under the Payment Services Directive, to provide a dispute resolution service. Until the points raised in our submission to the Hunt Review are dealt with, our government cannot plausibly claim to have discharged this obligation.

    And if the FOS are indeed the paragons of virtue that you proclaim, they could abandon their exemption from the Freedom of Information Act, so that outsiders can get decent statistics of what they do. They should also have a proper independent review of their operations, unlike the somewhat circumscribed one done by Lord Hunt.

  25. My case with the FOS is currently with the Independent Assessor. The Adjudicator, the Ombudsman and the Service Review Team didn’t even read statements the bank I complained of sent them. How do I know that? 1) the statements proved my case 2) right in the middle of them was a statement belonging to another customer of the bank – and neither the bank staff nor 3 departments at the FOS noticed. That isn’t a mistake – that is sheer biased negligence. My MP has written to the Independent Assessor that he is “alarmed” at what has happened. Reasonable? Unbiased? I don’t think so – amd I am not a whinger. The FOS is unfit for purpose.

  26. I would not hold out too much hope for the Independent Assessor, he may well decide its not a matter he is allowed to consider. He is, in any case, too close to the FOS itself and cannot compel them to do anything much. In my case he told me that there was force in my complaint about interest rates and asked the FOS to reconsider the interest rate used to calculate the redress payment. FOS simply refused and the IA just accepted that, after a cosy chat with the Principal Ombudsman. I wonder why he bothered to ask in the first place if he was prepared to accept a blank refusal.

    But truth is stranger than fiction. Although FOS refused to look at the interest rate (The Ombudsman’s decision is final, no Ombudsman can over-rule another !) they did decide to look at the tax situation which the IA had not asked them to look at and where I was content with the deal I negotiated with the bank myself… and found a mistake which the Principal Ombudsman instructed should be corrected with a cheque from the FOS itself … the bank was not asked to repay the tax it had incorrectly deducted ! (The Ombudsman’s decision is not so final in tax matters it seems ).

    The questions of why the Ombudsman missed the tax error in the first place, or why he approved the award as fair and reasonable without considering tax at all (thereby allowing a £4000 tax error to get through), or why the Principal Ombudsman chose to blame the Service Review Team who had nothing to do with the original mistake rather than the Ombudsman who made the decision, all remain unanswered.

    Please let us know what happens.

  27. I do not have a major grievance (loss of money) but was illegally treated by the insurance company who refused to disclose evidence(tape) for 9 months and then said they had lost it. I was guilty although they could produce no evidence. FOS treated the matter as of no consequence, that they do not act in the same way as courts in respect to evidence – the loss of the tape was not fatal, they fabricated arguments and took 19 months to come to a decision. I was sent a cheque for £100 by FOS which I did not ask for. The insurance company is now assured that it can treat customers as it pleases – there is a clause at the end of car insurance policies which states that the company can decide disputes as it likes – I did not know of this clause – I thought matters were decided on evidence.

  28. I have a complaint atm with HSBC which has been running since August this year while I was on hoiliday in Majorca.
    It starts like this: (bit of a trek so please bear with me)

    2 days before i was due to fly, i found out my holiday company had gone bust. (friday), phone the company and after mny phone calls to majorca, i was told i had to pay the hotel again for my stay, thankfully, the flights had been booked seperatly. But the hotel was going to cost me anpother 270es,
    A friend leant me £300 in order so that i had some holiday money to go away with, After 10hours of non stop hassle i eventailly arrived at thehotel nad booked in, paying them 270e out of my 470e holiday money, leaving the £300 in the bank to take out when i needed it, never thought i would need my credit cards.
    at midnight on the tuesday eve, while sat in the hotel bar i decided that the following morning i was going ot take the 300 out of the bank as i was misteriously running short on funds.. didnt occrur to me that maybe the cleaning staff might have had a hand in that. Sof about half 11 i appraoched the santander bank in palma nova to take the money out, enetered my pin, card was spat back at me saying that i had already readched my daily limit, tried another atm, same problem, came back to the santander atm and tried again with a lower amount, thinking that as i was abraod maybe the limits were different due to exchange fess.. after a 3rd time with no luck, i phoned tha bank from a payphone, to be told that thre was already a pending transaction on teh account from earlier that day.. i argues with this but was told that was the case. I returned back to the hotel and logged in to my bank accoutn to see for myself, nothing was showing, so after making sure i had logged out of my account i returned to my room and phone the bank AGAIN from my mobile.. (Cue and expensive call) .. after a rather lenghty phone call.. i was eventually transfered to another department who then upped my overdraft so that i could take some money out as i still had 4 days left on my holiday..
    i decided to leave taking the money out until the following day hoping that the fraudulent transaction would clear before i took any more out.
    so thursday morning i walked to a different bank, and took the money out with no problems. this transaction cleared within the hour.
    When i got home i went to the bank and spent numerous hours on the phone to the fraud department who put the money back into the account. at the start of september.
    The bank have now TAKEN THE MOINEY OUT of my account (with no notice to me, they say they sent me a letter on the 1st oct to inform me, which to this day i have not received, stating that a valid pin was used and there fore i must have taken the money out. they keep asking me if i kept the pin with the card, which after 12years of banking with hsbc i have NEVER done, to that point i have never even written the damn pin down anywhere)
    As i was on my own on holiday, there was no one with me who had access to the card.
    The last time i physically used the card before attemptng to take money out of the account was on the saturday before i left the uk.
    My problem i have now is that dspite the bank themselves telling me that the fraudulent transaction was taken out at 00:17 on teh 18th.. it didnt clear through my bank account until the 19th which is when i took the 2nd lot of 300es out (after upping my overdraft to do so) for which i am NOt disputing. How do i get the bank to agree that the original transaction for the 18th is fraudulent? is there anyway i can do so? OR as a single mum who can barely afford to loose £20 am i looking at being £254 + out of pocket even tho i didnt take the 1st transaction out?

    Any help would be much appreciated as i cant afford to loose this much money….. now the bank are telling me that another investigation will hve to be conducted, and it will take upto another 5weeks to resolve, at which time i still run the risk of not getting my missing money back!!!
    Please can anyone help?

  29. Complain to your bank quoting the Banking Code and the Consumer Credit Act. The bank is liable for the disputed transactions because your conduct was not grossly negligent. In the event that the Bank does not accept liability, refer your case to the Financial Ombudsman. Good luck!

  30. All of the Ombudsman services in Britain are paid for by the Industry (you) are complaining about.

    They have no legal powers and can only recommend a limited compensation payment.

    The Bank, Insurer etc, CAN JUST SAY SOD OFF.

    In other words the Ombudsman is just a toothless Mouse with no power.

    The system of Ombusman Services is just a time consuming tactic to put YOU OFF taking action at law.

    Knowing that most claimants give up after being frustrated by long delays.


    If you really want to take action (advertise your case) using THE INTERNET, THE MEDIA, BANNERS, PLACARDS, UNIVERSITY, ANY LEGAL TACTIC FREE AND AVAILIABLE TO YOU.

    Then ask the Minister in charge for an appointment (they are just MP’s) and lobby the hell out of them to change legislation.

  31. The energy ombudsman is also a chocolate fireguard and just a final wing of industry anti-customer attitudes. I told SSE not to use my personal data to promote themselves. I left them and they sent a “final statement” for leccy, with lots of details of services they offer that were not energy. 8 weeks later and off to the Ombudsman, another 8ish and they copped out with “we cannot rule on wording”. The intent presumably can then be ignored, meaning the complaint – and the industry normal habit (to ignore people’s statutory rights to privacy) – can be dismissed. No risk of criminal or civil consequences, and another non-creative, un-innovative, wealth-consolidating globalised corporation gets to just make a mockery of the public it is meant to serve.

    PS Please change this site’s page language to en-GB (eg line 9 on this page). My spellchecker is defaulting to en-US.

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