Lessons Not Learned: The Financial Services Industry Repeats Past Mistakes

Introduction

The UK financial services industry is making the same mistakes all over again. This time, it’s with the Financial Ombudsman Service (FOS) and its decision to introduce a £250 fee for claims management companies (CMCs) referring cases. While this move is supposed to deter frivolous complaints, it doesn’t go far enough—and risks shutting out genuine claimants in the process.

If history has taught us anything, it’s that when you introduce financial barriers under the guise of ‘efficiency’ or ‘fairer funding,’ it’s usually the most vulnerable who suffer. Just look at what happened when employment tribunal fees were introduced in 2013.

What We Didn’t Learn from Employment Tribunal Fees

Back in 2013, the UK government introduced tribunal fees to stop ‘vexatious’ claims. The result? A 70% drop in cases overnight—not because people suddenly stopped facing unfair treatment at work, but because they simply couldn’t afford to fight back. It took four years and a Supreme Court ruling to scrap the fees after it became clear they had denied people access to justice.

Fast forward to 2024, and here we are again. The FOS is introducing fees for CMCs in an attempt to stop frivolous complaints and ease the burden on financial firms. But the real effect? A reduction in legitimate claims, as many consumers—especially those already struggling—will be left without representation.

The Reality of the New CMC Fees

From April, CMCs will be charged £250 per case they refer after the first 10 cases. If a complaint is upheld, they get £175 back. Meanwhile, firms facing complaints will see their fees reduced from £650 to £475 if the complaint is withdrawn or not upheld.

On paper, this seems like a reasonable step to curb spurious claims. But in reality, it shifts the power dynamic in favour of financial firms while making it harder for ordinary consumers to seek redress.

Here’s why it’s a problem:

• The deterrent effect: Just as tribunal fees deterred genuine employment cases, this fee could make it harder for CMCs to take on smaller but still valid claims.
• Access to justice at risk: Wealthier claimants might not feel the impact, but for those who rely on CMCs to fight their corner, this fee could be the difference between getting justice and giving up.
• The imbalance remains: Financial firms have deep pockets and legal teams. Individual consumers don’t. Anything that makes it harder for people to pursue claims plays into the hands of the industry.

Will It Work? Experts Are Sceptical

Some industry voices argue that this fee isn’t enough to stop dodgy CMCs from flooding the system with weak claims. Others say it doesn’t go far enough in ensuring financial firms are held accountable.

Tim Jenkins, director at Jencap Partners, points out that the rewards for CMCs are so high that £250 is a ‘token amount’ that won’t deter the worst offenders. Meanwhile, Joshua Bates from law firm O’Connors warns that some CMCs will still take a ‘scattergun approach’—throwing claims at the FOS in the hope that some stick.

At the same time, the Financial Conduct Authority (FCA) is looking at wider reforms to modernise the redress system, acknowledging that ‘mass redress events’—like mis-sold PPI or pension transfer claims—create major headaches for both the industry and consumers. But until real, structural changes are made, these piecemeal solutions will continue to miss the mark.

What Needs to Happen?

If the FOS and FCA truly want to make the complaints system fairer, they need to learn from past mistakes and take meaningful action:

• Ensure access to redress: A fair system shouldn’t make it harder for consumers to get justice.
• Hold financial firms accountable: The focus shouldn’t just be on reducing complaints—it should be on preventing misconduct in the first place.
• Fix the power imbalance: Financial firms have resources that consumers don’t. The system needs to work in favour of fairness, not corporate convenience.

Conclusion

The UK financial system has a history of tilting the playing field in favour of big firms while making it harder for ordinary people to get a fair deal. Whether it’s employment tribunals or financial complaints, the pattern is the same: introduce fees, see case numbers plummet, then realise—too late—that justice has been denied.

This time, let’s not wait four years and a Supreme Court ruling to fix it.

---

Precedent Set: The Employment Tribunal Fees Fiasco

In July 2013, the UK government introduced fees for individuals bringing claims to Employment Tribunals (ETs) and the Employment Appeal Tribunal (EAT). The stated aim was to reduce the financial burden on taxpayers and deter unmeritorious claims. Fees ranged from £390 for simpler cases to £1,200 for more complex disputes.

The impact was immediate and dramatic—claims to ETs dropped by nearly 70%, not because workplace disputes disappeared, but because many workers simply couldn’t afford to seek justice. Concerns quickly arose that the fees weren’t just filtering out weak claims but also blocking access to justice for legitimate cases, particularly for low-income individuals and those with modest claims.

Critics argued that the high costs effectively priced vulnerable workers out of the system, making it financially unviable to pursue redress. Without affordable legal options, many were left unrepresented, allowing employers to act with impunity.

Legal challenges followed, and in July 2017, the Supreme Court ruled the fees unlawful, declaring them a violation of the fundamental right to access justice. The government was forced to scrap the fees and refund those who had paid them.

Despite this clear precedent, the government proposed reintroducing tribunal fees in January 2024, albeit at a much lower level—suggesting a £55 issue fee. However, concerns persist that even a modest charge could deter vulnerable workers, especially in economically challenging times.

This episode highlights a recurring challenge in public policy: the fine line between deterring frivolous claims and ensuring that justice remains accessible to all, regardless of financial means.

References:

1. Vexatious claims: Challenging the case for employment tribunal fees.
2. Access to justice damaged by courts and tribunals fees changes.
3. Impact of employment tribunal fees: Key issues for the 2015 Parliament.
4. R (UNISON) v Lord Chancellor [2017].
5. Another barrier to justice: proposed employment tribunal fees.