If you have fallen out with a bank, insurance company or financial firm, you may feel intimidated and not able to see a way forward.

This is exactly where the Financial Ombudsman can step in.

Sadly so often the giants of finance ride roughshod when a dispute arises. Despite thousands of well-phrased codes of conduct, the customer call centres can seem unyielding.

If you have struggled to resolve a problem and not succeeded, consult the Financial Ombudsman Service (FOS).

It was set up under the Financial Services and Markets Act 2000 to help to settle individual disputes between consumers and businesses providing financial services in a fair, quick and informal way.

It followed on from the voluntary schemes in banking and insurance which were established in the early 1980s.

The scope is immense, from banking, credit cards and insurance to mortgages, hire purchase and savings.

A few areas are excluded, such as:

Travel insurance when sold as a package – to be included from January)

Money transfers other than provided by banks

Some pension matters which are handled by the Pensions Ombudsman

Performance of an investment

Transactions outside the UK, such as the Channel Islands.

The service is free to consumers but each case referred costs the company involved £400 after their initial three free cases each year. This is a bargaining sum worth knowing when trying to resolve a dispute.

If a problem arises, give the business an opportunity to investigate and correct if appropriate.

The FOS can become involved either when eight weeks have elapsed and no final response has been received or the final response is unsatisfactory.

Do not leave a referral to more than six months after the final response letter.

The FOS is independent and impartial. It tries "to resolve disputes by means of mediation and recommended settlements, rather than by using formal ombudsmen powers," says its chairman, Sir Christopher Kelly.

Most disputes are settled within six to nine months and resolved without requiring an official decision by the Ombudsman.

Consumers do not have to accept the decision and are always free to go to court

However, if they accept an Ombudsman's decision, it is binding on both them and the business.

The FOS does not write the rules for financial service businesses or fine them if rules are broken. This is the role of the Financial Services Authority as the regulator.

It recently fined York-based Norwich Union Life £1.26m for failing to take reasonable care to organise and control its affairs responsibly and effectively.

Failure to act properly when selling payment protection insurance resulted in fines of £1.085m to HFC Bank and £840,000 to Liverpool Victoria.

Even motor retailers – like Ringway Garages of Doncaster and Leeds –
were fined "for serious breaches" which exposed customers to the risk of being sold unsuitable insurance policies.

These days businesses are required to tell customers about the Ombudsman at the start of any contract and again if an actual dispute arises. Yet fewer than one in five consumers who pursued complaints through the FOS say they learned about it from the business.

Anyone can complain on your behalf to the FOS, such as a family member or Citizens Advice. No specialist help – such as from a solicitor or claims-handling company – should be necessary.

The Ombudsman – 63-year-old Walter Merricks – says they prefer to hear in a complainant's own words.

If you employ someone to present your case, you may have to pay their costs.

The service is confidential and the names of consumers and businesses alike are not published.

In the 12 months to the end of March, the FOS handled a record 794,648 initial enquiries, which is a 27 per cent annual increase. Around one in six turned into cases involving the adjudicators and Ombudsmen, which is a 30 per cent annual rise.

Banking disputes more than trebled – fuelled largely by dissatisfaction with the level of unauthorised overdraft charges – and insurance conflicts doubled.

However, there was a sharp 70 per cent fall in complaints about mortgage endowments, which is not surprising as providers had placed time limits on appeals.

Disputes about payment protection insurance jumped, reflecting the oxygen of publicity given to some insurers and significant regulatory activity.

Other major increases in new cases were for credit cards – up from 2,731 to 14,123; cash machines – up from 291 to 883; motor insurance – up from 4,230 to 6,009; and SERPS – from 954 to 2,183. Encouraging reductions were seen for income drawdown – 142 to 88; and with-profits and unit-linked bonds – 2,601 to 1,192.

Size-wise, just over half the total cases were related to six of the UK's largest financial services groups.

The FOS resolved 99,699 cases of which nine out of 10 were settled informally without the need for formal Ombudsman decisions.

Keen to help consumers, information and enquiries are handled in over 30 languages – from Arabic to Welsh.

The FOS is funded both by an annual levy on the businesses covered and by case fees – excluding last year the first two cases referred, now raised to three.

Last year this amounted to £19.5m and £35.5m respectively. With 825 staff on average, the unit cost was £529.

Just over half the complainants were aged 35-64 years. In previous years, eight out of 10 were in this category. The proportion under 35 who used the service doubled over the year to 20 per cent.

Far more men, 63 per cent, raise complaints. Geographically, nine per cent from Yorkshire and the North East brought formal complaints, twice as many as Wales and the same as Scotland. The South East including London generated 29 per cent.

Complaints involving extended warranties have recently been evaluated by the FOS. Unclear policy wording upheld a complaint against an insurer who refused to cover damage to a leather sofa who said the manufacturer's repairs had been to a poor standard.

In another case, an insurer of damp-proofing treatment unreasonably turned down a claim for failure.

The Ombudsman found the policy document contained no information about the procedure for making a claim or the insurer's requirement to supply original documents and upheld the complaint.


Contact the Financial Ombudsman Service on 0845 080 1800, and the Pensions Ombudsman on 020 7834 9144.