From April 2025, the Financial Ombudsman Service (FOS) will introduce a £250 case fee for professional claims management firms, with the aim of ensuring fairer funding arrangements. The move is intended to reduce the number of poorly evidenced or meritless complaints, which FOS says contribute to longer wait times for consumers.
The decision has been met with mixed reactions, with some viewing it as a necessary step to prevent abuse of the system, while others argue it could deter legitimate claims. Martin Lewis’ MoneySavingExpert (MSE) has highlighted the implications for consumers using claims management firms, noting that only £175 of the fee will be refunded if the complaint is successful.
Why the Financial Ombudsman Service is Introducing Charges
The Financial Ombudsman Service, an independent body that resolves disputes between consumers and financial firms, currently funds its operations through case fees paid by financial service providers. Until now, professional claims firms and other “professional representatives” have not been subject to these charges.
According to James Dipple-Johnstone, interim chief ombudsman at FOS, this has resulted in many weak or abandoned claims being submitted, placing unnecessary strain on the system. He stated:
“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 As a not-for-profit service, we expend our finite resources handling thousands of withdrawn or abandoned cases, which can lead to longer wait times for other customers.”
Under the new rules, professional representatives will be allowed 10 free cases per financial year. Beyond this limit, a £250 charge will apply per case. If a complaint is upheld, £175 will be refunded, effectively reducing the cost to £75.
Notably, charities, family members, and friends assisting with complaints will be exempt from the charges, ensuring that individual consumers can still access FOS services without additional financial burden.
Impact on Financial Firms and Consumers
In addition to the charges for claims firms, the FOS is also reducing fees for financial service providers in cases where complaints brought against them by a claims firm are unsuccessful. Currently, financial firms pay £650 per case, but under the new rules, this will drop to £475 if the complaint is dismissed.
This change aims to create a greater balance in the funding model, discouraging frivolous complaints while ensuring that well-substantiated claims are prioritised.
According to MoneySavingExpert, the change could have significant financial implications for claims management firms, which often operate on a “no win, no fee” model. Some critics argue that this could disincentivise firms from pursuing claims, potentially leaving some consumers without representation.
However, the FOS has reassured the public that it remains free to those who bring complaints directly. Consumers who choose to navigate the complaints process independently, or with the help of a friend, family member, or charity, will not be affected by these new charges.
