How to outwit the dodgy dealers and canny crooks

We may be acclimatised to a culture of compensation for injuries or ill-treatment, but when it comes to financial matters, most people still hesitate to demand their money back.

We may be acclimatised to a culture of compensation for injuries or ill-treatment, but when it comes to financial matters, most people still hesitate to demand their money back. This is despite City scandals, questionable advertising and bad advice about savings products. It is largely due to the traditional attitude of caveat emptor, the legal Latin tag meaning that it is the consumer's own look-out.

Another reason is that finance is so complex that the customer is never quite sure whether it was a rip-off or ill luck. They had an answer to that at the training-school of a insurance company where budding salesmen were told: "Even after he has signed up, Mr Prospect will never understand what he has bought unless you explain the policy to him!".

Many of those who do realise that they were sold a pig in a poke cannot be bothered with all the calls, letters, form-filling and photocopies, let alone throwing good money after bad by consulting a solicitor. This is understandable because it is not clear where to seek redress if the company stonewalls.

Moreover, mergers, privatisation and flotations have caused all kinds of overlap. Who regulates a semi-financial utility, a building society that became a bank, or a chain-store that has branched out into credit, pensions, or share-dealing? No wonder the Little Old Lady in Cheltenham is bewildered.

The grievance procedure has become what might be called a mature industry since 1981 when Lieutenant-Colonel James Haswell from the Army Legal Corps became the first ombudsman for most of the insurance industry. His office was sanctioned by law, but it inspired voluntary schemes for banks, building societies and pensions.

The 1986 Financial Services Act produced parallel surveillance through the self-regulatory organisations and the umbrella Savings & Investments Board. When this became the Financial Services Authority (FSA), it was joined by the Personal Investment Authority (PIA).

To add to the confusion, five separate adjudicators have evolved. One is the Personal Insurance Arbitration Service (PIAS) that covers general products from companies that the sector's ombudsman cannot reach. Another is a grievance commissioner for those firms registered with the PIA, such as life offices and financial advisers. Then, there is the investment ombudsman for funds regulated by the Investment Management Regulatory Organisation (IMRO).

A separate complaints bureau deals with stockbrokers and others regulated by the Securities & Futures Authority (SFA). Its compensatory limit is £50,000 ­ half what the rest can award. But you cannot grumble to either of the last two if your stocks and shares fall!

Finally, there is a complaints unit for firms directly regulated by the Financial Services Authority, a body that failed to spot Equitable's eclipse.

Now these eight channels are being replaced by the Financial Ombudsman Service (FOS), based in London's Docklands, and the Treasury announced last week it would be fully operational by November. For now, the FSA will pass any complaint to the appropriate existing bureau. Its new booklet, "FSA guide to making a complaint", lists a consumers' helpline: 0845 6061234.

But gaps still remain to be plugged. They include mortgage and insurance brokers, although you could threaten to inform the British Insurance Brokers Association (BIBA). Nor does the writ run offshore, including banks in the Channel Islands where there is no compensatory scheme. And if you are a victim of daylight robbery involving loans or credit cards, that is for the Office of Fair Trading.

Curiouser still, pensions still have their own regulator in Brighton, while complaints about both occupational and personal schemes should go to the Pensions Advisory Service (PAS) that, usefully, shares premises with its standalone ombudsman.

At all events, any complaint must first be put to the firm in question. Write to the exact company (it may be part of a larger group), ideally identifying the relevant official, managing director or compliance officer. Send only photocopies of material documents ­ not originals. If the firm has not replied, even after recorded reminders, within eight weeks, or if the reply sounds unsatisfactory, you have six months to approach the FOS.

Even if it considers that a complaint is eligible, the process may be lengthy and varied. The ombudsman might try to force a compromise between company and customer. In certain cases, either party could demand a formal hearing, thanks to the EU Convention on Human Rights that took effect last October.

Whatever happens in this free process, you can usually turn to a civil court at any stage, but if that is just because arbitration fell short of expectations, it is wise to grab the cheque and run to the bank instead. Any award from the FOS is cancelled as soon as you lose in court which, in any case, will be influenced by the ombudsman's findings.

Trouble all round can be pre-empted by protesting about misleading publicity to the Advertising Standards Authority. Its spokeswoman, Donna Mitchell, says: "The ASA handles complaints where a City institution's advertising might be in poor taste, but if it looks like financial falsification, such as small print or past performance, we hand over to the Financial Standards Authority".