Administrative Court considers the meaning of 'eligible complainant' in DISP
20 May 2011
The claimant claimed that her identity had been stolen and that she had never borrowed the disputed sum.
She had sought to refer the matter to the Financial Ombudsman Service (FOS), but the FOS had declined to deal with her complaint. She applied for permission to bring a judicial review of the FOS' decision. Permission was refused on the papers and she applied for permission to appeal. The Administrative Court refused the claimant's application, finding that there was no reasonable prospect of the claim succeeding as the claimant was not an 'eligible complainant' under the rules of the Ombudsman scheme.
The claimant was in dispute with a finance company which alleged that she owed it approximately £10,000 on a credit card. The claimant claimed that she had never borrowed the disputed sum but her identity had been stolen and someone else had borrowed the money. She had sought to refer a complaint about the finance company to the Financial Ombudsman Service (FOS). The FOS declined to deal with her complaint on the basis that: (i) if the claimant was right (and she was not responsible for the credit card account which was the subject matter of her complaint) she was not an 'eligible complainant' for the purpose of DISP 2.7.6R because she was not a 'customer' of the finance company; and (ii) if the finance company was right (and she was responsible for the credit card account) then she did not have any reasonable prospect of success and so her complaint should be dismissed in any event (presumably under DISP 3.3.4R(3), which in summary provides that the FOS may dismiss a complaint without considering its merits in that circumstance).
The claimant's arguments
The claimant submitted that she was either a 'customer' or a 'potential customer' of the finance company and was therefore an 'eligible complainant' for the purpose of DISP 2.7.6R. She argued that while she was not, in her own eyes, a 'customer' of the finance company, the finance company had said that, in its eyes, she was. This, the claimant argued, made her sufficiently a 'customer' for the purposes of DISP 2.7.6R(1) to be considered an 'eligible complainant', so that the FOS had incorrectly declined to consider her complaint. In the alternative, the claimant submitted that she was sufficiently a 'potential customer' of the finance company for the purposes of DISP 2.7.6R(2) to be considered an 'eligible complainant', because a relationship had been created between her and the finance company, created by the finance company's (in her view) mistaken belief that she was actually its 'customer'.
The claimant supported her arguments with two main points. First, she pointed out an apparent anomaly between the way that the FOS had treated her complaint against the finance company which was the subject of the proposed judicial review, and the way that the FOS had treated a separate complaint she had made against a different bank (which had made a similar claim against her for repayment of funds she claimed she did not owe on the basis that her identity had been stolen). She highlighted that the FOS had initially declined to consider that separate complaint but ultimately had gone on to determine it. This was because she had been a 'customer' of that bank in respect of business other than the disputed loan about which she had complained. The FOS had been satisfied (having reconsidered the point) that she was an 'eligible complainant' in that case. It had determined that she should not owe any money to the bank, and ordered the bank to amend its records to that effect.
Secondly, the claimant argued that the FOS had published guidance on 10 April 2009 indicating that it could investigate complaints arising from situations like the claimant's, but in May 2010 it omitted this statement from its updated guidance (although this updated guidance was not readily accessible to the public). The claimant argued that this showed that the FOS itself appeared uncertain as to the scope of the concepts of 'customer' and 'potential customer' in DISP 2.7.6R.
The court rejected the claimant's arguments. It refused her appeal for permission to bring a judicial review of the FOS' decision not to consider her complaint. It held that she could not succeed on a proper construction of DISP (particularly DISP 2.7.6R) and its enabling provisions under FSMA. The key issue was the proper construction of these rules, and neither the FOS' determination in the separate case, nor the apparent change of position in its guidance, helped to determine that proper construction.
First, the court ruled that the claimant had no argument that could bring her within the definition of 'customer' for the purposes of DISP 2.7.6R(1). Eligibility was to be determined by what the complaint was. In this instance, the claimant had complained that she was not the finance company's 'customer'.
Secondly, the court ruled that the claimant was not a 'potential customer' of the finance company either (for the purposes of DISP 2.7.6R(2)). The term 'potential customer' plainly meant less than the whole world, and was, in the judge's view, a restricted and narrow category. There was no category of 'alleged customer'. A 'potential customer' necessarily involved some element of looking to the future. It involved some nexus between the complainant and the finance company. The judge did not see it as arguable that the expression 'potential customer' covered someone who was thought by the finance company to be a customer, but where the complainant denied that status.
The court held that, whatever the justice of the claimant's case, the proper construction of the current rules (DISP 2.7.6 in particular) was clear. The case highlights a policy issue: the scope of the FOS' jurisdiction to consider complaints involving identity theft or mistaken identity. Complainants are eligible to complain to the FOS in some types of identity theft or mistaken identity cases (see, for example, DISP 2.7.6R(12) in respect of complaints about certain debt collecting activities) but not in other types of case. The FSA recognised this in Consultation Paper CP10/21 (September 2010), pointing out that a complainant being pursued by a firm of which the complainant was a 'potential customer' would be eligible, whereas a similar complainant who had no intention of entering into a customer relationship with that firm would not. That view was, in effect, confirmed by the court in Goff. The FSA proposed (in CP10/21) to consult separately on rule changes in this area and to look at the likely costs and benefits associated with such changes. It sought evidence about the number of individuals who are ineligible to complain to the FOS in this type of case. It seems likely that the forthcoming FSA Policy Statement setting out responses to CP10/21 will contain further information in this regard.
This article first appeared on PLC.