Upheld: Motor finance commission (DCA) complaint against Fairstone Financial Management Limited

Decision detail

Summary

Ms J complained that Fairstone Financial Management Limited demanded a £3,956.38 clawback commission fee after she cancelled a life and critical illness insurance policy within 49 months of purchase. Ms J argued she was not made aware of this fee and would not have taken out the policy had she known. The ombudsman upheld the complaint, finding that whilst the clawback information was included in a 24-page client agreement, it was not sufficiently prominent or clear, the clawback period was not specified, and the adviser's recommendation report failed to mention the fee. The ombudsman concluded that Fairstone breached its duty to provide clear, fair and non-misleading information and ordered the firm to waive the £3,956.38 fee.

The Ombudsman's reasoning

The ombudsman found that whilst the clawback commission information was included in the client agreement, it was not sufficiently prominent or clear. Burying important information halfway through a lengthy document does not adequately bring it to a consumer's attention. Additionally, the client agreement failed to specify the 49-month clawback period, and the adviser's recommendation report made no mention of potential clawback fees. The insurer's illustration, whilst showing £0.00 from month 49, was not sufficiently explicit about the clawback period. Fairstone had a duty to provide clear, fair and non-misleading information to enable Ms J to make an informed decision. The ombudsman rejected Fairstone's argument that the information was transparent and accessible, finding it unreasonable to expect a consumer to navigate multiple documents or contact the firm at cancellation to understand clawback implications.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website