Consumer Complaints: FOS or the High Court?

Recent case law suggests there will be increased scrutiny over decisions by the FOS about the extent of its own jurisdiction.

The Financial Ombudsman Service ("FOS") plays a key role in determining complaints brought by consumers against financial institutions. That importance is underlined by the fact its decisions cannot be appealed. Courts can only exercise oversight over the FOS by way of Judicial Review which is restricted to assessing how a particular decision was made, as opposed to the substance of the decision itself.  Normally therefore, Judicial Review only offers a limited scope for challenging a decision.

Despite the limitations of Judicial Review, recent cases suggest a willingness on the part of Judges to actively scrutinise decisions taken by the FOS. 

The Financial Services and Markets Act 2000 and the FCA Handbook set out what type of complaint the FOS is able to consider and in what circumstances.  Strict time limits apply as to when consumers can lodge complaints with the FOS. If the complaint is lodged too late, the FOS cannot consider it, no matter how justified the complaint is.

An example of the difficulty in overturning an FOS decision by Judicial Review is the 2012 case of Bankole v FOS. The High Court upheld the refusal by the FOS to consider a complaint because the complaint had not been lodged within six months from the date of the Final Response issued by the financial institution. As far as the High Court was concerned, there was nothing irrational (the key requirement under any successful Judicial Review challenge) in the conclusion by the FOS that the complaint was not lodged within the time limit.   

However, last October, the High Court in Bluefin v FOS ruled the FOS ought not to have considered a complaint brought by the director of an on-line gambling company.  

Bluefin, a broker, had arranged a Directors and Officers insurance policy (D & O policy) with the director noted as an insured person.  His complaint to the FOS was that, whilst he had notified Bluefin of a court claim subsequently brought against him, the broker had failed in turn to notify the insurer, leaving the director without insurance cover in respect of the court proceedings.     

The FOS ruled the director was acting as a consumer because he was a “natural person acting for purposes outside his trade, business or profession" and so the FOS had jurisdiction to consider the substance of the director’s complaint. Bluefin successfully challenged that decision by Judicial Review.  The High Court ruled it was entitled to review the FOS's classification of the director as a consumer because this issue determined whether or not the FOS had jurisdiction to consider the complaint in the first place.  Mr Justice Wilkie stated this was a “hard edged precedent fact" and the court was entitled to substitute its own decision for that taken by the FOS. As the Judge ruled the director was not (within the meaning of the legislation) “a consumer” he was not entitled to complain to the FOS.    

Satisfying the definition of an “eligible complainant” and lodging the complaint within the six month time limit are both conditions which need to be satisfied before the FOS has jurisdiction to consider a complaint. It would appear a decision by the FOS over time limits (“Bankole”) is less susceptible to being overturned, than a decision about who makes the complaint (“Bluefin”).      

What type of complaint can be considered by the FOS was subject to a Judicial Review hearing in December last year.  A firm of accountants argued the FOS should not have considered a complaint because its substance involved the adequacy of tax avoidance advice. Emphasising the importance of the FOS correctly deciding what complaints it can review, Mr Justice Ouseley said there was nothing within the rules or legislation “to make the FOS master of the limits of its jurisdiction”.  Although this particular attempt at Judicial Review failed, the court opened up the prospect of more Judicial scrutiny  over the FOS.

In other words, despite the constraints of Judicial Review, the High Court appears reluctant to allow the FOS to have the final say on the scope of its own jurisdiction.

"this article appeared in the May 2015 edition of Credit Collections and Risk. For further information please contact Jeremy Bouchier, Senior Solicitor."


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