In administration, customers with complaints at the Financial Ombudsman (FOS) have them returned to the administrators to resolve. The same happens in a Scheme of Arrangement which has been proposed by Amigo in December 2020 and by Provident in March – there FOS complaints are returned to the Scheme to be determined.
FOS said in January 2021 it had about 13,000 open Amigo cases and about 500 new cases are arriving each week.
If these customers would have had a cash refund, then they are likely to only get paid a very small amount of their redress in the proposed Scheme. Some have had complaints at FOS for many months, a few for more than a year. They will be understandably upset that their cases were not resolved faster by FOS, before the Scheme.
This article looks at what can be done to speed up FOS complaint handling in future, to prevent this sort of problem affecting so many customers.
This is part of a series looking at Schemes, see Articles about Schemes of Arrangement.
Why do cases take such a long time at FOS?
It would be interesting to hear FOS’s views on this, but here are my thoughts.
1. Firms are not upholding complaints in line with FOS decisions
The Financial Conduct Authority (FCA)’s DISP rules say that firms need to learn from FOS decisions and apply them.
This has been a consistent problem with affordability complaints for years. Wonga, QuickQuid, ICL, Sunny and many smaller firms have all persisted in rejecting strong complaints or making very poor offers. As has Amigo and Provident.
When a firm is losing over 50% of its cases at FOS, then it needs to change its internal complaint handling. If it is losing over 80% of cases, as is the case for guarantor loans and home credit, then a root and branch reform is urgently needed.
FOS is supposed to be the place where difficult or marginal complaints are resolved – it is not meant for handling thousands of cases that the firms should have dealt with themselves. The FCA needs to step in here and tell firms that poor complaint handling is not acceptable.
2. FOS needs to staff up properly for affordability complaints
FOS has seen affordability complaints take off in the last few years but it isn’t clear that it has switched staff over and trained them up in sufficient numbers.
The general trend in FOS towards a generalist system may not be helping here, as the Treasury Committee has asked:
Given the foreseeable shift away from PPI cases towards more complex cases, why did the FOS move towards non-specialist investigator resourcing in 2016-17, and how will this be reversed to deal with more complex cases?
3. There is a financial incentive for firms to go slow on FOS cases
But one of the main frustrations for customers looking at the slow progress of their FOS case is the length of time firms take to deal with it. FOS appears to have no effective ways to force firms to provide information and responses promptly.
The FOS fee is invoiced when the case is complete. This gives a firm in financial difficulty an incentive to delay at every stage of FOS case handling:
- firms can take many months to simply send over their case file at the start;
- they don’t respond to adjudicator questions promptly;
- adjudicator decision are too often just ignored, not even rejected. FOS doesn’t want to force cases through an Ombudsman-level decision unnecessarily so firms are given extension after extension, to the frustration of customers.
I think FOS needs to change this so firms are incentivised to complete cases promptly.
I do understand the FOS preference for a simple system charging the same if a complaint is upheld or rejected. For FOS to get a smaller or larger fee depending on its decision feels unfair and undesirable.
But the current system could be improved by:
- invoicing firms as soon as a case arrives at FOS;
- setting out a scale of fines paid directly and immediately to the customer, not to FOS, for delays. eg £100 if the case file is not provided within six weeks, and a further £100 for every further two-week delay after that.
- reversing the current assumption that a firm who doesn’t respond to an adjudicator decision is deemed to have rejected it. Instead a firm should be deemed to have accepted an adjudicator decision if it has not replied with reasons for rejecting it within the set time limit. A two-week extension could be allowable on request by the firm for a complicated case.
What happens to FOS fees in a Scheme?
The Announcement by Amigo on 25 January clarified that FOS fees will be included in their proposed Scheme. This is what happened to FOS fees in the ICL Scheme of arrangement.
But if Amigo is carrying on lending, it would be an undesirable precedent for them to be able to walk away from paying their FOS fees.
The costs FOS incurred in handling Amigo complaints would then have to be paid effectively by the other authorised firms, which would include Amigo’s own competitors. This is a further competition issue that arises from this scheme in addition to the ones I looked at in my previous article Amigo Scheme – the implications for the bad credit market.
kevin says
I had my settlement agreed by Amigo and FOS and they went into Administration before they paid out.
Sara (Debt Camel) says
Amigo isn’t yet in administration – do you mean some other lender?
Chris says
If the decision was made prior to the 21st December then they have to go ahead and pay the redress in line with their publication.
I will be very interested in the outcome of the test cases that are sitting at a higher level in FOS around the way the money they paid to a guarantor was placed back to the borrower and the interest shambles.
Natalie says
My case is one of these cases and has been allocated to an ombudsman since July 20. Fos said these cases are on hold as they are still figuring out their approach and as my case is a final decision they need to make sure they get it right. As it sets precedent ….
Nick says
While not directly related, you may be amused to hear that I today received a cheque for £50 in relation to a complaint I made to First Direct in 2015. The mills of FOS grind slowly, but they grind exceeding small.
Craig says
Whilst it’s not Amigo I have had 2 ongoing complaints with the FOS that have both taken nearly 2 years to get completed. I Complained to the Independent Assessor who replied that they couldn’t respond to my complaint until the cases were closed, at which point it would look at my complaint and assess if any compensation was due. I then read the annual report on the FOS website which stated for 2019/2020 they reduced the number of complaints that would 12 months old by end of march 2020 from 27,000 to 400 (2 of which were mine) so I have submitted a request under the freedom of information act asking how old their longest complaint is (only just submitted and they have 4 weeks to reply) my thinking is that if the FOS are taking an unreasonable amount of time to resolve these cases (and I feel 2 years excessive) then if the company the complaint is against goes into administration then sure the loss in redress is the fault of the FOS and as such could then mean the FOS paying compensation. It sounds harsh but when you read their bold claims in the last annual report some things don’t ring true. Both my case have had 6 different people deal with them due to staff leaving yet their report states labour turnover as not a problem. All in all the FOS is a good thing but standards definitely need improving and this would only be done by bringing non compliant irresponsible lenders to task through new legislation.
Alex Forster says
I am also in that situation. Have 2 outstanding complaints, with UK Credit and Motonovo, both of which have been upheld by the adjudicator, but rejected by the companies, so have gone to the Ombudsman. These have been running for over 18 months now. It isn’t acceptable.
Craig says
It usually takes around 6 to 8 months for an ombudsman to pick up a case forwarded by an adjudicator. Complaining to the FOS doesn’t really achieve anything as they simply give the standard line of they are a free to use service with higher than expected number of cases but if you are thinking of complaining to the Independent Assessor once your cases have been finalised then you will need to complain to your case handler 1st. You can read the IA report on the FOS website as well as the FOS report. I have a feeling that the annual report for 2020/2021 may look a little different to last year’s report.
Sara (Debt Camel) says
It usually takes around 6 to 8 months for an ombudsman to pick up a case forwarded by an adjudicator.
I think this is very variable
Craig says
Sorry Sara you are right there are definately cases that can be picked up sooner. I should probably rephrase as my experience is only based on 2 cases that took that time frame to be picked up by an ombudsman.
It still remains that the FOS are taking far too long to get resolution to complaints in a large number of cases. It’s interesting that their format for reporting resolution time frames on their annual report only goes upto 12 months though? It should really include the oldest cases or they could look like they’re hiding from the truth. That was kind of my thinking when I submitted my freedom of information act request as I wanted to know just how old some of their cases are.
April says
Does this mean even people with a final decision have to then have to be reassessed? I am awaiting the final decision as the FOS needs to see if amigo have anything further to add
Sara (Debt Camel) says
Unless you have a Final Decision from an Ombudsman at FOS (not an adjudicator decision), or unless Amigo has already accepted an adjudicator decision or made you an offer, then it seems likely that your case will have to go into the Scheme if it goes ahead.
Angie says
I had an offer prior to 21st December after involving FOS ive had this email
I am just emailing as a quick update, we have been advised that Amigo are still not certain how they are moving forward with FOS offers since the announcement. We were made to believe that if an offer was made before 21 December 2020 then they should not be affected however it seems Amigo has not yet clarified if this is still the same with FOS offers as they are not technically final figures.
Does anyone know if this is the case with an FOS offer ?
Andi says
On the point of administration something more needs to be do, ie look into the rules of distribution.
HMRC, banks get the highest, which gives consumers (if a financial company) hardly anything and Vendors pittance as well.
Which could inturn force a vendor into administration as they can’t afford to pay HMRC, etc etc…
There should be an order:
Automatically – 50% of available funds go into a 1st time Distribution pot.
Where Employees (non directors), complainees/Redress with or without FOS are paid in full.
All Vendors upto 25% of balance owed upto £x amount.
Remaining funds go into pot 2.
Pot 2 is for HMRC, Banks, and the remaining 75% of Vendor balances and Director Pay
No Director Loan payments to come out of this pot either.
If I put this in change org/gov to discuss would you be willing to promote it (or even add further info)?
Sara (Debt Camel) says
That is a very different topic. Employees always get paid first. Banks don’t come next, only secured creditors. I disagree with HMRC’s preference – but the whole insolvency profession also objected to that and it was ignored. I think the government should arrange a different scheme to pay redress creditors such as the FSCS – I don’t think changing the order of insolvency payouts is appropriate.
Jamie says
Hi, great post again. Just a quick question and I’m not sure you will be able to answer it or not. I believe I have a very strong case and it’s currently with FOS after been rejected by Amigo initially with my complaint. If my case was to go back to Amigo and into this scheme and if I’m still unhappy with the outcome who do I go to for example if it didn’t qualify for whatever scheme they are going to do.
Sara (Debt Camel) says
In a Scheme there will be some form of appeal to someone. But the rules that person can use to assess your case may be retricive.
Basically Amigo are judge and jury in the Scheme – sorry.
If this gets the go ahead from the FCA, then you will need to decide whether you want to vote for the Scheme or not. We will know more about it at that point.
Sara (Debt Camel) says
have you been making payments? Those people that still owe a balance will get a much better result from the Scheme if their claim is upheld than those who have paid the last loan off.
But of course if your claim is rejected then you won’t get anything at all.
Vicki says
I’ve had a claim against Amigo going for over 12 months now with the FOS. Because amigo kept declining the decision it is now sat with an ombudsman to make a final decision.
Frustrating as the same thing happened to me with Wonga, so once again I am going to end up with practically nothing if the do get a scheme put in place.
These companies should be held accountable and not be able to wriggle out of these claims so easily!!
James Burry says
Help please had an offer from amigo via email from fos. I accept the offer fos contacted amigo now not paying me what was offered
Sara (Debt Camel) says
when was the date on the offer? if it was before Dec 21st you should be OK. But they are being very slow about paying out.
James Burry says
Had email on 18th December by fosOn 21st agreed by fos to amigo now stalling
Johnny says
Is that any idea when this might be sorted out with the FOS? As you say the longer it is delayed the more customers are paying Amigo on their current loan. This suits them but not the customer. If they haven’t replied after 8 weeks then customers with current loans with Amigo should refuse to pay any further payments until they have a response.
Sara (Debt Camel) says
The decision on the Scheme is with the FCA at the moment not FOS.
Peter says
Rang Amigo today! They are expecting a decision in 7-10 days. I explained the legal argument that if there is no agreement in a dispute, customers do not have to pay monthly payments, until the dispute is resolved. Please correct me if this is wrong but Amigo seemed wrll aware of this.
Sara (Debt Camel) says
As I sad before
“Are you on good terms with your guarantor? Because if you are sure that the redress will wipe out the balance then if the Scheme goes ahead or Amigo goes into administration then you will be better off stopping paying them anything. If you guarantor will be OK with this and will also delete their direct debit to Amigo?
This assumes that your case would be upheld in the Scheme or in administration. That is some risk. You have to weigh that against the fact you are just throwing money away to carry on paying them from now on if you complaint is upheld.”
A lender should not start a court case if a debt is in dispute. But Amigo will go after your guarantor which is why you need to talk to your guarantor, explain your situation and suggest they cancel their Direct Debit to Amigo if you decide to stop paying.
Aga says
I complaint about George Banco in April and my case haven’t been even allocated to a handler yet .On the FOS web most of the cases to be resolved within 90 days .I just wish this things could work faster.
kevin barham says
Hi Sara,
I have a loan(guarantor loan) complaint currently being investigated by the Financial Ombudsman and they are also dealing with the guarantor complaint of the loan, with the guarantor being my mother. Yes I am on good terms with my mother and there is still a balance outstanding, which I have not been paying the monthly payments over the last few months. Would it worth going to Amigo and proposing to a deal as I would still owe a balance if the agree that loan was offered unlawfully or wait for the scheme? I have also informed my mother to stop all payments, but Amigo are threatening us(not heard anything for a month or so though, this could be down to lockdown), would this now stop after the scheme development? My mum is worried about further action being taken against her as the guarantor until we get a decision. Thanks Kevin
Sara (Debt Camel) says
I think in practice there is no chance of getting Amigo to agree to any “deal” at the moment.
Your guarantor’s credit record will not be affected if she doesn’t pay. Amigo may threaten court but this just seems to be a threat at the moment – they are not going to court when there is an open complaint.
John says
Can you please tell me what happens if you stop payments to amigo loans as I am a guarantor for loan taken out in 2018 they are now coming after me for payments as loan not being paid although I have paid for missed and also for some interest on loan they now want me to pay for the loan as the person who got the loan can no longer afford to pay it amigo gave her Six months deferred payments for covid 19 and are taking £10 a month from her I know this from the from the letter they sent me but didn’t get this letter before I agreed to pay the monthly payments if they taking £10 a month that must mean they have put arrangement for her pay this for the loan is it left to me too pay the full monthly payments as they say I am I have now put in a complaint if I do not pay the account will full further behind and interest will be added they have right to take me to court and I could ccj against me take the money at directly from my income before I receive it.I have just received a letter saying they are looking into my complaint and is could take upto 8 weeks or give them a ring to try and find the best way forward
Sara (Debt Camel) says
Can I check you have sent a complaint saying the loan was not affordable for you when it was taken out and you should be released from the guarantee?
What about the borrower – have they also complained?
John says
Not really just a phone call saying what i though even though I did say i think it was missold in the beginning sould I have sent them an email giving that as the reason. The thing is sould I sill pay way i wait for the repliy from them . Thanks John
Sara (Debt Camel) says
ok, I think you should send in a complaint in writing. There is a template letter here that you can use: https://debtcamel.co.uk/amigo-complaints-by-guarantor/
And suggest the borrower does the same. There is a different letter for a borrower here: https://debtcamel.co.uk/how-to-complain-guarantor-loan/
Can you afford to make these payments to Amigo and still pay your own bills, debts and living expenses? Or will paying Amigo leave you too short of money so you have to borrow more?
Mary Richards says
FOS made redundant a lot of payday loan adjudicators in the summer. This was because they refused to become jack-of-all-trades “investigators” and take a large pay cut – in some cases 50%. Ombudsmen were also made redundant, as FOS wanted them to become jack-of-all-trades ombudsman managers (managing investigators and dealing with all types of cases).
Fortunately, the chief ombudsman and senior executive managers behind these disastrous decisions have now been “let go”. However, they did massive damage. FOS has lost a huge amount of experienced and knowledgeable adjudicators and is now having to replace them. It will take a long time to clear the backlog, maybe years.