Financial ombudsman comes under fire as insider reveals litany of bad practices

[timbo120]

Hi Everyone,

 

I have a portable mortgage. I took it out with GMAC which was taken over by Paratus. Paratus told me that due to a commercial reason, I would not now be able to port my mortgage. I wrote explaining the breach of contract issue but to no avail. I then wrote to the FOS and at first an adjudicator stated that porting was not guarenteed in my contract and that it was subject to my current credit rating. I wrote back explaining that I was not compelling my mortgage to be ported but the terms of my agreement are that my mortgage was portable and should at least be considered; that was the term of the contract. I appealed.

The argument Paratus gave was that they no longer had a licence to grant mortgages and this was the reason why I could not port mine. I went to the FSA register and under Paratus I found the said limitation on their licence. I also found a permission connected to it stating that the exception to the limitation was mortgages currently with the company which could be ported up to the value of the mortgage. I sent this information to the FOS confident that not only did this mean Paratus could port existing mortgages but as they had not told the truth to the FOS, that would work in my favour.

The final decision from Mrs O Leary stated that as Paratus could no longer grant mortgages, it was completely fair not to port mine. I re sent the information from the FSA register pointing out the fact porting was possible and got a letter back from the FOS stating that regardless of that information, it was a comercial decision by Paratus and thus fair.

On the issue of breach of contract I was informed that the FOS was not a court.

Clearly this institution is ignoring vital evidence when reaching it's decision and when you point out that the decision is based on information that is wrong, it moves the goal posts. I am now writing to my MP as I believe that the FOS is not fit for purpose and in a totalitarian state one might think its objective is to passify consumers in not enforcing their legal rights as the case has already been thrown out by a body set up and paid for by the state.

The letter stating that the bank acted fairly because it was a commercial decision shows how far the FOS is prepared to go to defend banks. If a bank decided to kill people because it's commercially expedient, would that be OK with the FOS. Isn't the point of such a body to check the actions of our financial institutions when their only vision is commercial expediency at the expense of everything else. The money spent on the FOS I believe could be better spent on increasing legal aid so that people can get access to people who know the law and can enforce it and not these armchair arbitrators who it is hoped are acting as the Maginot Line for banks.

[sweetjane]

Here's a bit of a recent letter about LIBOR and second charge mortgages I've sent to OFT (CCA Agreement) with copies to FSA, MPs, Journalists etc:

 

The Financial Ombudsman Service (staffed by ex-bankers and working to the Banking and Lending Codes drawn up by the British Bankers’ Association) is also unlikely to be able, willing or capable of investigating how LIBOR fixing has affected consumers. They rarely refer to the law just those codes.

and one frm 2010:

I copy below a complaint I have sent to the Financial Ombudsman Service this week. It outlines problems which I and many consumers have with the service. I have been reading the minutes of the Finance Bill going through Parliament and I believe many of you have a false idea of how independent the FOS is. I do not think it serves consumers well at all and I am not alone in this thought as you will find if you investigate complaints about the service and consumer websites and consult consumer advice organizations. The idea that a consumer can get a fair hearing by the FOS is incorrect.

Yours faithfully

Dear Sir / Madam

.........................

I am very concerned about the service offered to Consumers. I feel the decisions are weighted in favour of the finance industry. I do not feel that due attention is paid by the FOS to Consumer law and Consumer Protection generally. For example Unfair relationships and the Enterprise Act, UTCCRs, Irresponsible Lending and the Fraud Act are not taken into consideration. I do not believe the service follows FSA or OFT guidelines or pays heed to the evidence against the banks and their behaviour over the last 20 years. There is a huge body of evidence now proving how the banks have lent irresponsibly and in a predatory way. There is a bill going through Parliament featuring evidence on consumers’ experience. There are consultations backed by evidence that the FSA and the OFT are carrying out. There is a review of credit cards and store cards being carried out by the Department of Business and Innovation, again with evidence collected about banking and lender practices. There is substantial research and evidence collected by CAB, Which, National Debtline and Shelter. The FOS as an independent body should be immersed in all these latest pieces of evidence.

An adjudicator wrote to me recently saying:

“The phrase relating to each case being considered on its own merits relates to how each individual lender looks at financial difficulties. There is no set rule that a lender must do xyz, instead the rules stated that it has to treat its customer positively and sympathetically. What one lender considers positive and sympathetic will clearly be different to another, and different again to what the customer believes. This is not something the Financial Ombudsman Service would interfere with unless we can see the lender has breached the relevant code - in this case it does not appear to have.”

AND

“The Financial Ombudsman Service is an independent organisation set up to be an alternative to the legal process. We are required to reach decisions that are fair and reasonable having regard to (but not necessarily being bound to) any relevant law amongst other things.”

AND

the company “considers it legitimate, you consider it harassment.” . . . “ The issue of debt collection is always going to, clearly, be something a customer is unhappy with and it is possible they feel that the collections activity is too much. However, a lender has the right to make attempts to reclaim money owed to it and this can be done over the telephone or in writing, or both.”

An Ombudsman wrote:

“a refund of bank charges would provide a welcome boost to Mr XXXXX’s financial position, but I do not think I can reasonably say that the Bank of XXXXXXX has failed to comply with its obligations simply because it has not agreed to refund historic charges”

“Welcome boost” is an incredibly patronizing phrase and suggests we’re playing games and chancing our luck. These are people suffering hardship.

The companies will be forced to change their behaviour by Parliament and the regulators in the future but there are people suffering NOW because of the banks’ recent behaviour. Things will change for future customers but the FOS is the only method a consumer has for “independent” complaint without going to court. I believe the FOS is not acknowledging the appalling behaviour of the banks, credit card companies and lenders. The FOS must acknowledge that the Banking Code is simply not enough to quote in replies, the service needs to be far more rigorous in their complaint handling.

Another adjudicator wrote:

“It is not our role to check calculations”

That is ridiculous – the FINANCIAL Ombudsman Service’s role is not to check calculations? Surely this is wrong? If consumers go to the FOS saying they believe their interest has been wrongly applied. The FINANCIAL Ombudsman Service has to check that out. You rely too easily on the information and calculations given to you by the companies – that is not being independent.

You are inundated with complaints, there are huge delays but when you write to a member of the public who has to struggle to find time to reply you set deadlines of less than two weeks. I know there are quotas for adjudicators to resolve so many cases per week but putting that kind of pressure on the public is not fair. The FOS and the companies have full time employees dealing with complaints.

You say you want to hear from people “in their own words” but actually the public have to present a case like a lawyer. Your staff should be able to see the consumer side far more comprehensively and be aware of consumers’ rights. I believe many people do not go through the company complaints system and certainly not the FOS route because they are not consumer friendly.

Many people are in serious financial trouble now and it has been caused to a large extent by the financial institutions. The FOS needs to acknowledge this evidence and be far more tuned in to the problems which have been caused by the companies. Customers have not understood agreements, they have not understood interest rates and they have not understood charges and penalties. Companies have taken advantage of this confusion and lack of understanding and have profited from it. The FOS are in the front line of dealing with the redress that is required to these vulnerable people NOW. Stop arguing that because someone signed an agreement they knew what they were taking on. It’s on the record – they didn’t.

If the FOS is not following consumer law and taking on board the available evidence against the companies, I do not believe it is fit for purpose.

[timbo120]

Thank you Sweet Jane for your reply. I have now written to my MP, Mr Kevin Brennan who has sat on several financial committees and like me has an interest in corporate and financial governance. I am not optimistic at present that anything can be done but one can hope.

 

Just one further illustration of the FOS's attitude to clamiants. I entered into loan agreement with Barclays in 2007.

 

It was secured on my property and in the terms it stated that if the loan was not repaid after 6 months, it would convert to a mortgage. The loan was not registered by the bank and after one year, the bank declared that the facility was no longer available and that it would now be converted to a secured loan, increasing the repayments by 4 fold.

 

I pointed out the terms of the original agreement but Barclays stated that again it was a commercial decision. I appealed to the Ombudsman and in its final decision concluded that Barclays had not produced a sigend agreement for the first loan and still cannot, but nevertheless the terms of the loan were clearly short term (in spite of the clause relating to the conversion to a mortgage) and that Barclays had acted fairly.

 

What is the point of this institution and I believe it would be one idea for the programme Watchdog, which often refers consumers to the FOS, to do a piece on its shortcomings. The loan remains outstanding and has now for 6 years. I am shortly to commence proceedings against Barclays for breach of contract, failure of care and skill in executing a contract under common law and negligence.

 

Sadly had my contract been a year later I would have been covered by the new provisions of the amended Consumer Credit Act which consolidates the fomer common law position but I have not given up hope yet.

Edited August 31, 2012 by citizenB
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[Dougal16T]

Good morning all,

 

I make no apology for the length of this post, but I believe it is in all of our interests to be fully aware of what the OFT say they can do. So here it is:

 

 

PART 8 OF THE Enterprise Act: .....The Act itself makes interesting reading.....(I really must get out more!!)

 

OFT

- MATTERS WHICH MAY GIVE RISE TO AN UNFAIR

RELATIONSHIP

 

3.1 Matters which, in the OFT’s view, may give rise to an unfair relationship,

and might trigger Part 8 enforcement action, are (for convenience)

grouped under two broad headings - contract terms and business

practices. These are considered further below.

 

Contract terms

 

3.2 Section 140A(1)(a) of the Act provides that an unfair relationship may

arise by virtue of the terms of the credit agreement or any related

agreement.

3.3 In some cases unfair contract terms may be sufficient in themselves to

give rise to an unfair relationship. In other cases it may be the

combination of terms taken together with business practices (whether

or not relating to the operation of the terms), changing circumstances

and/or other acts or omissions of the creditor.

3.4 In considering the unfairness or otherwise of contract terms and their

relevance to any unfair relationship, the OFT may have regard to:

• where appropriate, the Unfair Contract Terms Act 1977 (UCTA)24

• whether the term is unfair for the purposes of the Unfair Terms in

Consumer Contracts Regulations 1999 (UTCCRs)

• how the term has been enforced and the circumstances at the time

of enforcement.

 

[ The UCTA limits the extent to which civil liability for breach of contract, or for breach of duty,

can be avoided by means of contract terms.]

 

3.5 The UTCCRs provide that a contractual term (if not individually

negotiated) is unfair if, contrary to the requirement of good faith, it

causes a significant imbalance in the parties' rights and obligations

under the contract, to the detriment of the consumer. The UTCCRs

apply to oral contract terms as well as written terms. Infringement of

the UTCCRs may be actionable both directly and via Part 8 as a

Community infringement.

 

3.6 Schedule 2 to the UTCCRs comprises an indicative and non-exhaustive

list of terms which may be regarded as unfair. For example, a term may

be unfair if it has the object or effect of:

• requiring any consumer who fails to fulfil his obligation to pay a

disproportionately high sum in compensation

• enabling the supplier to alter the terms of the contract unilaterally

without a valid reason which is specified in the contract, or

• excluding or hindering the consumer's right to take legal action or

exercise any other legal remedy.

 

3.7 It is important to emphasise, however, that a term may be unfair under

the UTCCRs without necessarily giving rise to an unfair relationship. For

example, the term may be insufficiently central to the relationship

between the parties as to make the relationship as a whole unfair to the

borrower. This will depend upon the facts of the individual case.

 

3.8 Equally, a term may not be unfair for the purposes of the UTCCRs but

may still trigger consideration of whether there is an unfair relationship

within the meaning of section 140A of the Act. In particular, the

UTCCRs preclude an assessment of fairness in relation to terms which

define the main subject matter of the contract, or which relate to the

adequacy of the price or remuneration, provided that they are expressed

in plain intelligible language. These are commonly referred to as core

terms. Such terms may nevertheless give rise to, or contribute to, a

finding of an unfair relationship in an individual case. They may also be

relevant to an assessment of the fairness of other terms.

 

3.9 The test of unfairness under the UTCCRs also does not apply to terms

which have been individually negotiated between the parties. However,

there is no such restriction in section 140A(1)(a) of the Act and the

court could have regard to such terms in the context of unfair

relationships.

 

3.10 There have been a number of court decisions in relation to the UTCCRs

and the UCTA. In addition, the OFT has published regulatory guidance

setting out our general approach to enforcement of the UTCCRs.

 

3.11 The guidance emphasises that the requirement of good faith embodies a

general 'principle of fair and open dealing'26 with suppliers being

expected, in drafting contracts, to respect consumers' legitimate

interests. Contractual imbalance may arise, to the detriment of the

consumer, wherever a term gives powers or safeguards to the supplier

which could put the consumer at a disadvantage, whether or not actual

harm is caused. Failure to abide by such principles may contribute to an

unfair relationship.

 

3.12 In relation to financial penalties, the UTCCRs guidance in particular

states that:

• it is unfair to impose disproportionate sanctions for breach of

contract

 

25 See Unfair contract terms guidance (OFT311). The UTCCRs guidance is arranged according to

the categories of unfair terms listed in Schedule 2 to the UTCCRs, with two additional

categories covering other types of unfairness. The guidance explains why the OFT considers

certain standard contract terms used with consumers to be potentially unfair.

http://www.oft.gov.uk/shared_oft/reports/unfair_contract_terms/oft311.pdf

26 Court of Appeal decision in Director General of Fair Trading v First National Bank plc [2000] 2

AU ER 759.

 

Group 5: Financial penalties - Paragraph 1(e) of Schedule 2 of the UTCCRs guidance.

 

• in the OFT's view, a discretionary right to vary the price after the

consumer has become bound may be unfair, particularly if the

consumer is not free to terminate the contract without penalty,

 

• a price variation clause may be unfair even if it is not discretionary.

Relevant considerations would include whether increases are linked

to an external index, the scope for the supplier to decide the level

and timing of any increase, and whether details are clearly and

adequately drawn to the consumer's attention.

 

3.13 A requirement to pay more in compensation for a breach than a

reasonable pre-estimate of the loss caused to the supplier is one kind of

disproportionate sanction, and will also normally be void as a penalty

under common law. A term may also be unfair if it allows the supplier

excessive discretion to decide the level of a penalty, or if it could have

that effect through being unclear or misleading. Such clauses may

create an unfair relationship in individual circumstances and the OFT

may have regard to these in considering any action under Part 8.

 

3.14 The OFT has also issued guidance on the application of the UTCCRs in

relation to particular market sectors or types of contract term, some of

which is relevant to credit agreements or related agreements.

 

3.15 For example, we have issued a statement setting out our view on

calculating fair default charges in credit card contracts. This sets out a

number of general principles which are also likely to be relevant to

default charges in other standard agreements with consumers.

 

3.16 All transactions between commercial creditors and consumer borrowers

will normally involve terms which are subject to consideration under the

UTCCRs. The OFT has no reason to suppose that the courts will give a

meaning to the concept of unfairness in relationships arising from contract terms which is fundamentally different from that given in the context of the UTCCRs.

 

28 Paragraph 1(l) of Schedule 2 and part 12 of the UTCCRs guidance.

29 Calculating fair default charges in credit card contracts: A statement of the OFT's position

(OFT842), April 2006 http://www.oft.gov.uk/shared_oft/reports/financial_products/oft842.pdf

OFT854Rev

 

Rates and charges

 

3.17 The interest rate under a credit agreement, or other charges falling

within the total charge for credit, would normally be core terms and so,

if clearly expressed, would not themselves be subject to an assessment

of fairness under the UTCCRs. This would not, however, preclude the

court from taking such terms into account in deciding whether the

relationship is unfair to the borrower.31 Equally, the OFT or another

enforcer would be entitled to have regard to such terms in deciding

whether to take Part 8 action.

 

3.18 A term providing for variations in the interest rate would not, in the

OFT's view, constitute a core term within the meaning of the UTCCRs

as it does not relate to the adequacy of the initial price. A variation term

which confers excessive discretion on the creditor either to vary rates

and charges, or not to vary them, in line with changes in the market,

may be considered unfair under the UTCCRs and may also be a relevant

factor in considering whether there is an unfair relationship.

 

3.19 The unfair relationships test in section 140A of the Act does not refer

expressly to rates or payments, in contrast to the previous extortionate

credit bargains provisions. Section 138 of the Act provided that,

amongst other things, a credit bargain was extortionate if it required the

borrower to make payments which were grossly exorbitant, having

regard to interest rates and other relevant considerations.

 

3.20 Nevertheless, in the OFT's view, there is scope for the court, at its

discretion, to find that a credit relationship is unfair on the grounds that

it involves excessive costs for the borrower. Section 140A (2) of the

Act states that the court shall have regard to all matters it thinks

relevant. This could include, for example, the cost of the credit

agreement or any related agreement. This appears to be endorsed by

Ministerial statements in Parliament during the passage of the 2006

Act.32 This could include, for example, the cost of the credit

agreement or any related agreement. This appears to be endorsed by

Ministerial statements in Parliament during the passage of the 2006

Act.32

 

See for example judgement: Barons Finance Ltd v Olubisi (unreported).

 

3.21 For example, the rate of interest charged under a credit agreement, or

the rate or amount of other fees or charges, may be so much higher

than those applicable generally in the particular market sector, or

payable by borrowers in similar situations, as to make the relationship as

a whole unfair to the borrower. They may also, in the particular

circumstances, be oppressive or exploitative of the individual borrower.

 

33 even if they are in line with rates prevailing in the particular sector.

 

3.22 In some cases, excessive prices may be accompanied by other unfair

terms or practices which may contribute to an unfair relationship as well

as being susceptible to possible Part 8 action in their own right. For

example, the borrower may be unaware that a fee would be charged in

a particular case, or of the level of the fee, or how this might impact on

the debt. He may also be unaware that rates might increase in particular

circumstances, or were unlikely to reduce in line with changes in the

market. The creditor (or a broker or other intermediary) may have failed

to disclose relevant information, or may have done so in a false or

misleading manner, misrepresenting key elements. The information

may have been unclear or ambiguous, and so may not have been readily

comprehensible.

 

3.23 As a result, the consumer may not have entered into the transaction in

full knowledge of the facts. He may also have had, in the

circumstances, no real choice as to acceptance of the particular terms,

or may have been subject to aggressive marketing.

 

34 See for example judgment: Yates and Lorenzelli v Nemo Personal Finance and another

(unreported).

35 See for example judgment: Wollerton v Black Horse Ltd (unreported).

 

3.24 In addition, the creditor may have failed to take account of the

borrower’s circumstances or to have made a proper assessment of

whether the borrower could afford the credit. This may be an

irresponsible lending practice and could also potentially impact on the

fairness of the relationship.

 

Business practices

 

3.25 Section 140A (1)(b) and © of the Act provide that an unfair relationship

may arise by virtue of the way in which the creditor has exercised or

enforced its rights under the credit agreement (or a related agreement)

or any other thing done or not done by, or on behalf of, the creditor

either before or after the making of the agreement. For convenience, we

group these together under the heading business practices.

 

3.26 For these purposes it is immaterial whether the practice in question is

itself an infringement of the law, or may be actionable as such, although

this may be relevant in determining the OFT's enforcement priorities and

the appropriate mechanism for dealing with the issue.

 

3.27 Nevertheless, it may be helpful to sub-divide business practices

according to whether they contravene the law, or involve issues of

unfairness but without necessarily infringing any legal requirement.

 

Practices which infringe the law

3.28 An act or omission giving rise to an unfair relationship may also be an

infringement of the Act or other consumer protection legislation. As

such, it may constitute a domestic or Community infringement in its

own right and may be actionable as such under Part 8.

 

See chapter 4 of the OFT's Irresponsible Lending Guidance (for link see footnote 1).

 

3.29 The whole of the Act (including regulations made under it) is specified in

the Domestic Infringements Order (and some aspects also constitute

Community infringements).

 

3.30 For the purpose of considering Part 8 action in relation to unfair

relationships, relevant matters for consideration may include (but are not

restricted to) the following:

 

• credit advertisements

• pre-contractual information and explanations

• assessment of creditworthiness

• supply of copy agreement

• right of withdrawal

• post-contractual information

• arrears and default

• enforcement and termination, and

• early repayment.

 

3.31 Relevant legislation includes, for example, the CPRs, the Data

Protection Act 1998, the Sale of Goods Act 1979, the Consumer

Protection (Distance Selling) Regulations 2000 and the Consumer

Protection (Cancellation of Contracts Concluded away from Business

Premises) Regulations 2008.

 

Unfair practices which are not necessarily unlawful

 

3.32 Practices can give rise to an unfair relationship even if they do not themselves involve any contravention of the law. In considering the unfairness of such practices the court might elect to have regard to whether they are of a kind that has been identified as unfair in the past (whether by a court or in a regulatory context) or which is recognisably unfair according to established tests of fairness.

 

3.33 Regulatory guidance on what is or is not acceptable business practice

may therefore be helpful in identifying creditor behaviour falling within

section 140A (1)(b) or © of the Act and which might attract

enforcement action under Part 8 in respect of unfair relationships.

 

3.34 Section 25 of the Act requires the OFT, in assessing fitness to hold a

consumer credit licence, to have regard to any matters appearing to it to

be relevant, including those specified in section 25(2). These include

(amongst other things) evidence tending to show that the trader, or any

of its employees, agents or associates41 (whether past or present), has

engaged in business practices appearing to the OFT to be deceitful or

oppressive or otherwise unfair or improper, whether unlawful or not.

 

3.35 Such practices may relate to any aspect of the business. This could

include the marketing, conclusion or operation of credit agreements or

related agreements, or their enforcement. It may also include business

activities which are not in themselves licensable under the Act.

 

3.36 Section 25(2B) of the Act specifies as an example of an unfair or

improper business practice, a practice in the carrying on of a consumer

credit business that appears to the OFT to involve irresponsible

lending.

 

Including a business associate as referred to in section 25(3) of the Act.

 

3.37 Section 25A of the Act requires the OFT to prepare and publish guidance

in relation to how it determines, or proposes to determine, whether

persons are fit to hold a consumer credit licence. The OFT must have

regard to its guidance in carrying out its functions under the Act.

 

3.38 We have published general guidance on fitness, and also specific

guidance in respect of irresponsible lending, second charge lending, debt

collection and debt management.

 

The general fitness guidance

 

3.39 The annexe to the general fitness guidance45 includes examples of

business practices which the OFT considers are likely to be regarded as

unfair or improper for the purposes of section 25(2A)(e) of the Act.

 

These include the following:

• failing to comply with the Act or regulations made under it46

• using false or misleading statements in order to induce consumers to

enter into a contract

• hiding important details about credit deals in the small print

• requiring consumers to sign credit agreements that are not easily

legible and are difficult to understand

• failing to perform contractual obligations to consumers, or to give

any or adequate redress when in breach of duty to consumers.

 

Specific guidance for credit brokers is being published in 2011.

 

http://www.oft.gov.uk/shared_oft/business_leaflets/credit_licences/oft969.pdf

 

See also section 25(2A)(b)(i) of the Act.

 

• inappropriately marketing or targeting loans explicitly at particularly

vulnerable consumers (including those rendered vulnerable as a

consequence of problem indebtedness)

 

• using unacceptably high-pressure selling techniques or engaging in

other aggressive commercial practices

 

• misrepresenting the form, nature, purpose or long-term implications

of loan agreements.

 

The Irresponsible Lending Guidance

 

3.40 The Irresponsible Lending Guidance (ILG) highlights business practices

that the OFT considers may constitute irresponsible lending practices for

the purposes of section 25(2B) of the Act.

 

3.41 Chapter 2 of the ILG contains a number of overarching principles of

consumer protection and fair business practice which creditors should

have regard to. Chapters 3 to 7 explain the standards the OFT expects

from businesses when explaining credit, assessing affordability, dealing

with borrowers pre- and post-contract and handling arrears and default.

These chapters also identify (non-exhaustive examples of) specific

practices at various stages of the lending process which, in the OFT’s

view, may constitute irresponsible lending practices.

 

3.42 When assessing whether an unfair relationship has arisen, it may be

relevant to consider whether the creditor has adhered to the following

principles, as described in the guidance.

 

Creditors should in particular:

 

• not use misleading or oppressive behaviour when advertising, selling

or seeking to enforce a credit agreement

 

• make a reasonable assessment of whether a borrower can afford to

meet repayments in a sustainable manner

 

• explain the key features of the credit agreement to enable the

borrower to make an informed choice

 

• monitor the borrower's repayment record during the course of the

agreement, offering assistance where the borrower appears to be

experiencing difficulty, and

 

• treat borrowers fairly and with forbearance if they experience

difficulties.

 

3.43 In addition, the guidance emphasises the importance of the following

principles, which may be relevant when assessing whether an unfair

relationship has arisen:

 

• transparency in dealings between creditors and borrowers, with

information and documentation directed at, or provided to,

borrowers being compliant with relevant legislation and not being in

any way misleading

 

• disclosure of key contract terms and conditions (including rates and

charges), ensuring that these are fair (and are not unfairly balanced

in favour of the creditor) and are clear and intelligible, so as to be

understandable by borrowers

 

• fair treatment of borrowers – they should not be targeted with credit

products that are clearly unsuitable for them, or subjected to highpressure

selling, aggressive or oppressive behaviour or inappropriate

coercion, or conduct which is deceitful, oppressive, unfair or

improper, whether unlawful or not

 

• forbearance and consideration towards borrowers experiencing

difficulty – we would expect creditors to work with such borrowers

with a view to providing them with reasonable time and opportunity

to meet repayments, and

 

• proportionality in dealings between creditors and borrowers – actions

taken in respect of arrears or default should give proper consideration

to available options, with repossession of a borrower's home only

being used as a last resort.

 

Other OFT guidance

 

3.44 Other OFT sectoral guidance documents including those on second

charge lending,48 debt collection and debt management,49 further set out

our views on the standards that we would expect from any business

operating in these sectors, and should be read alongside the

Irresponsible Lending Guidance.

 

3.45 As noted above, section 140A of the Act extends to the way in which

the creditor exercises or enforces its rights under the credit agreement

(or any related agreement) and any other thing done (or not done) by or

on behalf of the creditor – for example, by a broker, a debt collector or

a debt management firm – in relation to the agreement.

 

Other relevant matters

 

3.46 Issues of fairness also arise in a number of other contexts, which may be

relevant to whether business practices which do not themselves infringe

the law may nevertheless involve acts or omissions giving rise to an

unfair relationship.

 

48Second charge lending – OFT guidance for creditors and brokers (OFT1105) July 2009

http://www.oft.gov.uk/about-the-oft/legal-powers/legal/cca/second-charge-lending

49 Revised OFT Guidance on Debt Collection and Debt Management is to be issued in 2011.

http://www.oft.gov.uk/about-the-oft/legal-powers/legal/cca/debt-collection

http://www.oft.gov.uk/about-the-oft/legal-powers/legal/cca/debt-management

Guidance on the standards that the OFT expects of creditors when dealing with borrowers who

have, or might have mental capacity limitations is also due to be published in 2011.

http://www.oft.gov.uk/about-the-oft/legal-powers/legal/cca/mental-capacity-guidance/

 

3.47 In particular, we would take into account whether there has been a

breach of the rules or principles of the Financial Services Authority

(FSA), for example in relation to linked insurance products such as

Payment Protection Insurance (PPI) which may have been sold with the

loan.

 

In considering possible Part 8 action in relation to unfair

relationships, the OFT may take into account, where appropriate,

whether the firm has complied with the principles underlying the FSA's

Treating Customers Fairly initiative,52 and with other generally accepted

standards of fairness.

 

3.48 We may also take account of evidence of compliance with industry

codes of practice such as the Lending Code which requires subscribers

to act fairly and reasonably in all their dealings with customers by, as a

minimum, meeting all the commitments and standards in the Code. In

some instances such codes have been supplemented by guidance or

best practice principles. Account may also be taken of relevant findings

by other self-regulatory bodies.

 

3.49 In addition, we may have regard to findings by the Financial Ombudsman

Service in individual disputes between borrowers and creditors.

 

Where such cases highlight underlying principles in assessing the fairness or

otherwise of transactions, we will take these into account as

appropriate in considering our enforcement activities.

 

 

56 We have a memorandum of understanding (MoU) with the Financial Ombudsman Service,

setting out our respective responsibilities and how best we can work together, which can be

found at http://www.financial-ombudsman.org.uk/about/fos-OFT_MoU.pdf. The MoU includes

provisions relating to cooperation and information sharing. In particular, the Financial

Ombudsman Service will notify the OFT if it has concerns about the fitness or propriety of a

consumer credit licensee or is aware of issues that may require action by the OFT. The Financial

Ombudsman Service may also disclose other information for the purpose of assisting the OFT to

discharge its functions.

 

4 APPLICATION OF PART 8 TO UNFAIR RELATIONSHIPS

 

Part 8 of the Enterprise Act

 

4.1 Part 8 allows for certain enforcers (including the OFT) to accept

undertakings from, and where appropriate to seek court orders againstbusinesses that infringe their legal obligations.

 

4.2 Part 8 is injunctive in nature. Its purpose is to stop practices or actions

which harm the collective interests of consumers and to deter traders

from engaging in similar conduct in the future.

 

4.3 Where individual consumers are seeking to enforce their rights against a

particular trader (for example as a means of gaining redress) in respect

of contended unfair relationships, this might be done through an

application to the court for an order against the business concerned.

 

Alternatively, the consumer may make a complaint to the business, or

(having done so) may seek resolution of the dispute by approaching the

Financial Ombudsman Service which will determine disputes according

to what is fair and reasonable.

 

4.4 In practice, the OFT anticipates that most consumers are likely to seek

out-of-court resolution of disputes rather than initiate court proceedings

which may be costly and time-consuming. Nevertheless, the unfair

relationships provisions provide an important additional protection for

consumers, and may be especially useful for borrowers facing court

proceedings for enforcement or repossession.

 

The role of the OFT

 

4.5 It is not the role of the OFT to take up complaints on behalf of individual

consumers. Our role (in particular in relation to consumer credit businesses) is regulatory – to act in the public interest, and on behalf of

consumers generally, in monitoring and enforcing compliance with

relevant legislation and adherence to standards set out in relevant

guidance.

 

57 Information on the relevant court procedures may be found on the websites of the various

Court Services, for example http://www.hmcourts-service.gov.uk

 

4.6 We have powers to take enforcement action under Part 8 where

businesses infringe their legal obligations and as a result harm the

collective interests of consumers. However, we will only act under Part

8 if we consider that it is appropriate and proportionate to do so and

that there is a reasonable prospect of success in any court action (which

in turn will depend upon how we believe a court would be likely to

interpret and apply the unfair relationships test in the particular

circumstances).

 

4.7 This guidance does not bind other Part 8 enforcers but we would

encourage them to have regard to it in considering taking any relevant

actions under Part 8.

 

4.8 The OFT also co-ordinates actions under Part 8 with a view to ensuring

that businesses are not subjected to unnecessary multiple approaches

and that court proceedings are taken only where warranted.

 

4.9 In addition, we administer the licensing system under the Act. This requires us to be satisfied that a person is fit to engage in consumer credit activities. In doing so we must have regard to all relevant matters including whether the trader, or an associate or former associate, has contravened relevant legislation or has engaged in business practices which are deceitful or oppressive or otherwise unfair or improper, whether unlawful or not.

 

:-)If you have got this far I thank you for reading my post. What is vital is that we are ALL aware of what can be done to protect us, and so we must take steps to ensure that it is done. How?

 

The answer is starightforward - It means that everyone affected MUST write to the OFT and lodge a complaint against their lender/bank/second charge provider. This is so that the OFt will act - BUT only if they get enough complaints about any one trader.

 

One further thought - PPI Claims that are failing at present....could they be better routed as breaching Section 8 of the Enterprise Act?? Any thoughts anyone.....

 

I think that a SWIFT response from everyone will help!!

 

As always

 

best wishes to everyone

 

Dougal

[red-ed]

My mother has just had a reply from the FOS, after a 3 year wait, for case against an Insurance Company re:very large insurance claim which caused serious distress. There was well over 50 different obvious issues, all backed up with significant and relevant evidence, showing a mixture of gross incompetence and negligence on the part of the insurance company. The Ombudsman looked at each issue, and stated that his 'opinion', for each and every issue, the insurance company did not have a case to answer. My mother said it felt like she was dealing with the insurance company not an impartial Ombudsman - everything the insurance said (with no evidence), no matter how outrageous, was believed by the Ombudsman, and everything my mum said (with evidence) was dismissed by the Ombudsman.

 

Something very seriously wrong here!!

 

Yes, letters are going to several MPs, and i urge other to do the same, and maybe people in authority will take long hard and very cold look at the contribution this organisation is making to society

Edited August 31, 2012 by red-ed

[rdm2006]

I wonder if anyone has ever sued FOS itself. I am sure it would fail under the trades descriptions act lol

[citizenB]

Red-ed, have you considered sending a Subject Access request to the Financial Ombudsman It might provide you with some insight at to how they arrived at their decision.

[tifo]

I'm about to start a judicial review against the FOS for a decision which I believe is totally biased. The decision even said the other party was at fault yet no remedy or compensation was awarded !!

[red-ed]

Thank you Mr B - i will pass this suggestion onto my mother. She is very upset and still cannot believe that an Ombudsman can be so incompetent (and perhaps bias).

 

Further i have heard the independent adjudicator, who is meant to oversee the FOS, will not look into claims of incompetence and/or bias dressed up as 'opinion' or judgement', which means as long as the FOS follows the right procedure, the FOS can do whatever they like, no matter how ridiculous or wrong etc.

 

Ed

[red-ed]

Hi Tifo, good luck with your action. It is about time that the issues within the FOS are exposed. I do hope that the process will not cost you too much in terms of time and money. Please keep us informed on progress.

 

Ed

[rdm2006]

Thank you Mr B - i will pass this suggestion onto my mother. She is very upset and still cannot believe that an Ombudsman can be so incompetent (and perhaps bias).

 

Further i have heard the independent adjudicator, who is meant to oversee the FOS, will not look into claims of incompetence and/or bias dressed up as 'opinion' or judgement', which means as long as the FOS follows the right procedure, the FOS can do whatever they like, no matter how ridiculous or wrong etc.

 

Ed

 

and dont forget the independent assessor is so independent that s/he is chosen from (and by) the fos board - now you couldnt get more independent than that could you

[sillygirl1]

I had a complaint in with this lot ages ago, and they said it was 'perfectly acceptable' for the company to write their reply to my complaint to my OLD address as I had not properly informed them I had moved - BULL - they had been writing to me perfectly well at the NEW address in the 9 months before my complaint!

 

The very fact that it takes 2 years or so to get something 'progressed' after waiting 8 weeks (when you have been given the run around already) is wrong and smacks of incompetent administration - hang on - don't these people have degrees etc but obviously no paperwork skills.

 

They also seem to lack basic reading comprehension skills (as does the DWP - another story).

 

You often read of councils acting on ONE complaint and other cases where hundreds of complaints have been made and nothing was acted on.

[AuntieP]

The Independent Assessor is appointed by the FOS board, but not from the board. Although the previous IA was a previous board member, the current IA, Linda Costelloe Baker was nothing to do with FOS before her appointment, indeed, sensitive to criticism about lack of independence, her selection board was modified to included a "public interest observer" though what this person did ( with non voting observer status only) is not known.

 

The current IA is a good person who tries hard, but she has no powers to do very much and she is SPECIFICALLY PROHIBITED from even commenting on the merits of any FOS decisions. Even if she makes a recommendation the FOS board can decide not to follow it. (Though they have never done this in 10 years). She receives a very large salary (one of the highest at FOS if it is scaled up to show her annual rate as a comparison) and spends her time assessing "service standards" and making a few small awards (£25-£1000) for poor service standards. Her last Annual Report gives one shocking example of FOS poor service, proving that she does perform a useful role and does not seem to be afraid to criticise FOS (service standards only !).

 

Although people who have suffered poor service from FOS can appeal to the IA, those who have suffered poor decisions have no appeals process. All Ombudsman's decisions are "fair and reasonable" and none of the 20,000 decisions FOS ombudsmen made last year have any mistakes. The ombudsman is always right and his decision is final so no appeals process is necessary. I can think of no other role in public life which has such powers.

 

The IA's annual report is hidden away at the very end of the FOS Annual Review ... read the case study on page 78 (Its a big download unfortunately)

http://www.financial-ombudsman.org.uk/publications/directors-report-2011-12.pdf#page=76

 

Her personal web site is here ... worth a look...

http://www.independent-assessor.org.uk/

 

Another more critical view of the role of the IA is here

http://www.financial-ombudsman-problems.co.uk/independent%20assessor.htm

 

The only hope for changing the FOS is to write to your MP. If enough of them get the message that change is needed we may get somewhere.

Edited September 7, 2012 by AuntieP
typos and minor edit

[red-ed]

Thank you AuntieP - i think the problem is the FOS know all this, so as long as they follow the correct procedure, they can do what they like, and that seems to include works of fiction and rulings riddled with errors and bias, and then dress it up as opinion or judgement.

 

I wonder if they realise, that they are no longer the solution the problem, they have actually become the problem!

 

Ed

[tifo]

Hi Tifo, good luck with your action. It is about time that the issues within the FOS are exposed. I do hope that the process will not cost you too much in terms of time and money. Please keep us informed on progress.

 

Am I able to start a JR while I send it to the IA? I now have the option to do either but can I do both?

 

I'm looking to see of I can find a CFA for the JR.

 

In my case the Ombudsman has missed a chunk of my complaint, the part that he would have to uphold based on the policy, and declined the parts that he considers are not included in the policy. Despite ALL my submissions mentioning ALL my heads of claim, he says that this part was not a part of my complaint. Even the loss adjuster referred to it in the relevant head of claim !!!

 

So my decision is incomplete as it does not include part of my claim and complaint and doesn't seem to have been investigated properly. So my claim/complaint against the FOS is that they have not fulfilled their statutory obligations in reaching a "fair and reasonable decision under ALL the circumstances" and have not departed from the wording of the policy (literally a few words) to make a decision which is fair under the circumstances.

 

In other complaints, they're happy to depart from the word of the law (never mind an agreement) so it helps the 'poor' bank who will suffer losses (a few hundred pounds).

 

I've written up to board level and they all say (about 3 replies from various people) that the decision is made and cannot be changed.

 

Just for background, my complaint is that my building guarantee should pay for repairs due to defects by the developer when I bought a new build home. The insurer accepts there are defects and that there is damage and the Ombudsman accepts that the developer has not installed some materials properly. This has resulted in extensive damp and black mould on all upper floor ceilings and around window frames and two walls. There are a few other things but these were upheld. The damp and black mould head of claim was declined.

 

There is a specific requirement in the policy for the developer to ensure 'bridges' do not occur on walls and around window frames but this does not mention the word ceiling. So the Ombudsman has declined the whole head of claim because it does mention ceiling and has failed to uphold the parts it does mention, i.e. walls and window frames, by saying these were not part of my complaint. Yet the loss adjuster, for the insurer, specifically mentions these areas in the report which declined all my heads of claims. And this report was part of my complaint as well as the areas being mentioned separately.

 

There is a clause in the policy requiring the developer to work with care, skill and in a workman-like manner. The fact that the insurer and the Ombudsman both accept the defects are due to incorrect installation of materials and this has resulted in the damages claimed for, why is this not a breach of the clause? The Ombudsman said he cannot comment on the clause, yet is happy for the insurer to use other clauses in the same policy, such as exclusions and notice requirements.

 

So I believe that my claim should succeed because the damage is covered by a specific requirement and/or policy clause.

 

The stumbling block is the definition of the damage the insurer pays on. This says 'including' the structure but the insurer is saying it means 'only' the structure (and nothing else). So the Ombudsman declined my claim by saying the damage is no to the structure of the home. End of any discussion.

 

The insurer says sue the developer who in turn says nothing to do with us as it was a insurer backed policy.

 

Having spoken to the insurer solicitors, they agree that the decision seems lopsided but that the policy isn't always what the home owner expects, so I said not "fit for purpose"? They said no comment.

 

There is also a possible claim against the developer who sold the home and policy to me since it is not fit for the purpose it was sold for. Also, I can raise the whole claim against the developer since they sold me the home.

Edited September 8, 2012 by tifo

[rdm2006]

The IA will only look at the way that fos has handled your claim and can not (nor will not) make any comment on its decision being correct or not.

 

The JR, as the name suggests, perform a review (if i have understood correctly it is done by a judge as if you were in court) so the two are completely different so yes you can do both.

 

I thought that new builds were automatically covered by the Buildmark or NHBC (National House-Building Council), or something like that, for the first ten years???

Edited September 9, 2012 by rdm2006

[tifo]

I thought that new builds were automatically covered by the Buildmark or NHBC (National House-Building Council), or something like that, for the first ten years???

 

Yes, that's right.

 

This is why the decision is unfair, I have defects and damage which are covered (from how the policy is worded) but the insurer says it's not covered so the Ombudsman said they're right and don't have to pay while also saying the developer did not install materials correctly which then resulted in the defects and damage.

 

Since I bought a new home which is meant to be built to a certain standard which the policy insures, who should pay for remedying my damages?

 

The cost is estimated at around £20,000 and the insurer says I should carry out the repairs since the house should be maintained for the buildings insurance.

[sweetjane]

The length of time the FOS takes to process complaints is unacceptable. It takes a long time because of the massive volume of complaints about the banking (and Finance) industry the FOS has to deal with. Surely the answer is for banks etc to pay much more when complaints about them are submitted (currently £500 I believe). I would suggest the possibility of a FOS complaint should be a greater financial deterrent - say £5000. I think this would improve banks' behaviour, reduce the number of complaints and give a better FOS service to consumers. It would not cost banks more in the long run because there wouldn't be as many complaints. Banks could also be made to contribute more to the FSA (or new FCA) according to how many consumer complaints they have had made against them. This is appropriate because the more they mistreat their customers, the more regulation they need. Maybe even tax them more pro rata for complaints against them. . .

 

SJ

[citizenB]

The length of time the FOS takes to process complaints is unacceptable. It takes a long time because of the massive volume of complaints about the banking (and Finance) industry the FOS has to deal with. Surely the answer is for banks etc to pay much more when complaints about them are submitted (currently £500 I believe). I would suggest the possibility of a FOS complaint should be a greater financial deterrent - say £5000. I think this would improve banks' behaviour, reduce the number of complaints and give a better FOS service to consumers. It would not cost banks more in the long run because there wouldn't be as many complaints. Banks could also be made to contribute more to the FSA (or new FCA) according to how many consumer complaints they have had made against them. This is appropriate because the more they mistreat their customers, the more regulation they need. Maybe even tax them more pro rata for complaints against them. . .

 

SJ

 

SJ, the banks are now charged £850.00 I believe

[Rohannah]

Hello Dougal,

I have read and re-read this post thanks for taking the time on it,I would willingly complain to the OFT about the flagrant disregard for the guidelines above many of which I have encountered whilst trying to help my husband with his problem- it's sickening to be truthful.As you say we should ALL lodge a complaint against those that have behaved so badly and if there is anyone interested in complaining to OFT about HSBC and their appalling behaviour give me a shout.Many thanks Dougal and I hope you are in good shape for your next "appearance".

[sweetjane]

SJ, the banks are now charged £850.00 I believe

 

Thanks citizenB - still not enough though! As I said £5k might make a difference to banks behaviour and FOS timescales. SJ:oops:

[rdm2006]

Thanks citizenB - still not enough though! As I said £5k might make a difference to banks behaviour and FOS timescales. SJ:oops:

 

another option could be to fine the banks by this amount whenever they fail to deal with a complaint properly (such as the current ppi problems for example)

[Scrapper]

Or disband FOS and set a completely independent body that is ACTUALLY independent.

 

Not an organisation that is supposed to be independent yet all it's employees seem to have their own long term agenda. Career enhancement and god knows what else. My personal opinion.

 

You only have to look at my complaint about Barclays and read all the correspondence between Sharkleys and FOS to see what was really going on. Sharkleys are now investigating maters correctly. Funny that considering I have them by the short and curlys

[red-ed]

Hi Scrapper,

 

I agree the FOS (and independent adjudicator) is a national disgrace, like the LCS. They are not independent, and hide bad practice and bias behind 'opinion', and should be disbanded ASAP. I am of the opinion, they actually make things worse, because they let banks and insurance companies etc off murder so to speak which encourages them to behave even worse. Furthermore, they also seem to believe they are above the law, and make rulings that ignore and/or cut across basic law.

 

Ed

Edited September 16, 2012 by red-ed

[Ibsys]

http://www.thetimes.co.uk/tto/public/sitesearch.do?querystring=ombudsman+whistleblower&p=tto&pf=all&bl=on

 

and was writen by Lauren Thompson - who should be congratulated for this piece

 

 

 

 

Banks hold Ombudsman in Contempt

 

Do you want to hear something disgusting? Here goes............... Nat West sent a mortgage offer to friends of ours which was received on a Friday, Bank changed over mortgage on Monday morning. They did not want mortgage which was £70k more than existing one so rejected it. Bank took no notice. Health insurance was voided due to pre existing condition. Ombudsman said bank had done nothing wrong. Bank has broken law, MCOBS and solicitors have not provided a duty of care. This caused financial difficulties due to health but not now insured for illness.

 

They went to Court yesterday. Nat West solicitors went in to Judges chambers for a 10 minute private conversation, Judge then called our friends in court and refused to look at evidence and house was repossessed.(28 days) What a stitch up! One family ruined by a bank hungry for business. They have all proof and I have read every page. They can't get legal aid and can't afford a solicitor. I am prime witness but was described as "a nothing". Judge laughed when writing eviction order. I could not go due to operation/recovery since hospital.