What is the Financial Ombudsman Service?

Explore what the Financial Ombudsman Service is and how they work to protect consumers

If you ever have a complaint about a UK financial services firm, you can escalate it all the way up to the Financial Ombudsman Service if needed. 

In this guide we will explain what the Financial Ombudsman Service is, and how it exists to protect customers of financial markets, including equity release:

• What is the Financial Ombudsman Service?
• How does the Financial Ombudsman Service protect someone taking out equity release? 
• Case study of a complaint taken to the Financial Ombudsman Service
• Are there any other protections in place for equity release customers?
• Find out more about equity release.

For fully regulated advice on unlocking your property wealth, please speak to our friendly selected advisers on 0808 178 3055, or request a call back for a time that suits you. Alternatively, check your eligibility and get an initial indication of how much tax-free cash you could release.

What is the Financial Ombudsman Service?

The Financial Ombudsman Service is a free service that settles complaints between consumers and firms that provide financial services. Set up by Parliament in 2001, over one million people each year now contact them about problems they are having with financial service providers. 

They work to resolve disputes fairly and impartially, and have the power to resolve issues to put them right. Areas of financial services they cover include banking, credit cards, insurance, loans, debt collection, mortgages and pensions. This includes complaints about a fraud or scam that you believe you may have been a victim of.

The service is free and is designed to be easy-to-use, with no need for you to ask a lawyer or claims management company for help. If you have a complaint about a financial services firm, you can use the Financial Ombudsman Service’s online complaint form to check whether they might be able to help. However, the service does recommend that you initially give the business you’re unhappy with an opportunity to resolve things first.

How does the Financial Ombudsman Service protect someone taking out equity release? 

All equity release advisers, brokers and providers are regulated by the Financial Conduct Authority. This means they have to abide by a code of conduct, including the requirement to have procedures in place for resolving complaints.

If you do have a complaint then you should follow the Financial Ombudsman Service’s how to complain guidance. To begin with, you will need to explain to your equity release company what you’re unhappy about, and the reasons why.

If you’re not happy with the response you receive from the business, you can then escalate your complaint to the Financial Ombudsman Service. They will impartially weigh up the evidence and tell you what they think. For this reason, it is very important that you provide as much information as possible about your complaint.

The types of complaints the Financial Ombudsman Service has seen in the past from equity release customers includes:

• Someone thinks equity release wasn’t suitable for them because they’d always planned to move or downsize, or because they have other savings available.
• Someone feels they should be exempt from an early repayment charge because they or their spouse needs long-term care, or their spouse has now died
• They – or a relative – may think they were vulnerable and wrongly sold equity release
• They’re unhappy about the overall cost of their equity release scheme

Case study of a complaint taken to the Financial Ombudsman Service

The Financial Ombudsman Service provides case studies on its website to help customers understand how they can resolve disputes and the outcomes they can achieve. An example is this case study about a retired couple who were sold an equity release lifetime mortgage when there were cheaper ways to increase income.

An adviser recommended that a couple cash in their endowment policies to pay off their existing mortgage and take out a lifetime mortgage for £100,000. But when the husband died eight years later, the wife decided to sell their house in order to move to a smaller property. This meant paying off the lifetime mortgage, which would have incurred an early repayment charge of £25,000.

The Financial Ombudsman Service says: “We felt that paying off the existing mortgage with savings then replacing capital with released equity was a very expensive way of raising money. And in three years, the mortgage would have been paid off, reducing their outgoings further. We decided Robert and Sarah should never have been sold the lifetime mortgage.”

This case study illustrates the importance of your adviser taking the time to understand your unique wants and needs before making a recommendation. At Equity Release Wise, we work with selected advisers who will do this. If they do not think equity release is actually the best option for you at this time, they will tell you. Speak to our friendly team today on 0808 178 3055, or request a call back for a time that suits you, and we’ll arrange an appointment for you.

Are there any other protections in place for equity release customers?

Equity release customers have the reassurance of other protections and safeguards. In addition to the Financial Ombudsman Service, the following bodies work to protect equity release customers:

Equity Release Council

As the governing body for the industry, the Equity Release Council has a strict code of conduct that all members must abide by. These rules have protected customers for over 30 years, helping to ensure equity release horror stories remain a thing of the past. 

The ERC also has a set of standards and equity release guarantees that its members must agree to, which include the ‘no negative equity’ guarantee, so you’ll never owe more than the value of home. Our selected advisers are members of the Equity Release Council and fully support these standards.

Financial Conduct Authority

Anyone offering you advice on equity release, or providing you with an equity release product, must be authorised and regulated by the Financial Conduct Authority.

In fact, no lender, broker or adviser is able to operate in the UK without authorisation by the FCA. To be successful, firms must demonstrate that they meet a range of requirements, which includes signing up a strict code of conduct and agreeing to the FCA’s stringent standards.

Financial Services Compensation Scheme

Should an equity release company go bust and you are therefore unable to claim compensation from them, you may be able to seek help from the Financial Services Compensation Scheme (FSCS).

The FSCS offers protection specific to equity release customers where their equity release adviser or provider has gone bust, and where they are suffering due to:

• Advice to take out a lifetime mortgage that was unsuitable (for advice given after 31 October 2004) 
• Bad advice about home reversion plans (since 6 April 2007)

You can read more in our guide to the Financial Services Compensation Scheme and how it might protect equity release customers.

Find out more about equity release

If you are a UK homeowner aged 55 or over then our friendly team is ready and waiting to help you find out more about equity release. 

For regulated advice that puts your individual wants and needs for retirement first, talk to our friendly selected advisers on 0808 178 3055, or request a call back for a time that suits you. Alternatively, check your eligibility and get an initial indication of how much tax-free cash you could release.

Are you younger than 55 and in need of a cash boost? Read our blog here to explore how to release equity if you are under 55.

About Clare Yates. With over a decade’s experience writing about later life financial planning, Clare offers a wealth of knowledge about equity release, pension annuities, wills, LPAs and more. When she isn’t writing, Clare likes to spend her time baking and going on walks with her husband, two children and their rescue dog. Follow Clare on LinkedIn