In legal terms the ruling might not be categorised as a landmark one, especially as a worried FOS will undoubtedly appeal, but it will warm the cockles of brokers who have never seen the fairness of having to pay for claims that are not upheld.
Of course, if such a ruling were to set a precedent the FOS would have to change the way it’s funded. Don’t get me wrong, I think it does an excellent job, but it has to cover its own costs and its budget for 2008/09 of £49.4m has to be paid for somehow.
The net result might be that brokers will have to pay more if cases against them are upheld and perhaps the FOS levy will have to increase too, but most firms will see the fairness of this.
There is also the administration issue of refunding fees once brokers’ positions have been established, but the FOS is a massive organisation and could work out an effective way of doing this. I know that the FOS is gracious enough to allow firms a number of free initial claims. But why should they use up these claims on cases that are not upheld?
And how many claims are made by consumers who do not have valid claims but have been motivated by government campaigns such as the ‘R U Owed’ advertisements that ran during television shows such as The Bill to attract audiences of up to 10 million.
Although that campaign focussed on pensions mis-selling, there have been similar campaigns aimed at other financial service products too.
I’m the first to back the rights of consumers to seek redress if they have been wronged, but we all know there are some consumers who complete complaint forms even if they are happy with the advice they’ve received in the hope of getting something for nothing.
I’ve long argued that the FOS needs to rethink the way it is funded. Maybe this ruling will be the catalyst that forces the change.
After all, when a judge says that no reasonable public body would maintain and enforce such a rule, someone has to listen.