Financial Legal Loophole Gives Consumers More Bite

The Financial Ombudsman and lawyers are urging consumers with complaints against financial services firms to take their grievances to court to gain more compensation.

The free ombudsman service has a top limit award of £150,000, but a legal loophole allows consumers to accept a financial award from an adjudicator and chase further damages in court for the same complaint.

This is because an adjudication is not an ombudsman ruling, which is final and binding.

The ombudsman rules set up more than a decade ago allowed consumers to accept confirmation from the watchdog or the courts, but not to go to both for the same complaint.

However, court cases have made the rules a mess, with one case confirming if the ombudsman made a ruling, the decision was binding and more compensation could not be sought from the courts.

Clear distinction

Another case says cases decided by an adjudicator do not count as ombudsman settled cases. This allows consumers to go to court for a compensation top-up because the decision is not automatically final and binding or an award made by the ombudsman.

Lawyers claim the settlement wording of an adjudicated complaint dealt with by the ombudsman service makes the distinction clear to consumers.

“Although they can take the case to court, consumers should understand that legal costs could eat a large part of any compensation,” said Simon Laird, partner at law firm RPC.

To work around the loophole, RPC suggests consumers should accept the highest award offered by an adjudicator and make sure any agreement is not considered ‘full and final’ so they can take the case to court.

“The agreement should not contradict any comments made by the adjudicator,” said Laird.

Warnings about bogus advisers

  • The Right Loan 4 U (clone)
  • Redbrook Motor Company
  • Drummonds Initiatives
  • LEM Spreads / LE Management Ltd
  • GBL Financial Services Ltd (clone)
  • Cash Direct UK
  • Smith and Stanley Corporate Consultants
  • Brookmore Partners/ Brookemore Partners/ Brookmoore Partners/ Brookmore Associates
  • Jacob Johnson Consultancy
  • Williamson Advisors Ltd
  • Bauer and Associates / Bauer Consultants
  • Carrington Group LLC
  • Jacobs Buchanan Investment Advisors / Jacobs Buchanan Partnership
  • PlusFN Ltd / +FN / Equity Sky Capital Marketing Limited
  • Fredric & Formby / Fredric and Formby / Fredericks Ltd (clone)
  • BAM Capital / BAM Forex (clone)
  • Springer Asset Management
  • Quick Finance

Dealing with an unregulated firm

If you buy shares, save money or invest with an unregulated firm, you lose any protection offered by the Financial Ombudsman and the Financial Services Compensation Scheme. Broadly, you have no independent place to complain if the deal goes wrong and are unlikely to win any compensation.

Below is a list of some related articles, guides and insights that you may find of interest.

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