global insurance management

FOS: Recent Developments

Feb 11 2013

FOS: Recent Developments

Relevance:             All authorised firms

Action required:     None, but issued for information and awareness.

FOS (the Financial Ombudsman Service) was set up by law and given powers to settle financial complaints.

  • Their service covers regulated firms authorised by the FSA and is designed to be accessible for everyone and to meet any particular needs consumers may have. 
  • They have to operate completely independently; to look at the facts, to ask questions and to decide what’s fair in each individual case.
  • They are funded by levies and case fees which businesses they cover have to pay; they do not receive any government funding.  Consumers do not pay to bring a complaint to FOS.
  • The award limit was increased from £100,000 to £150,000 in January 2012,

There have been two recent events relating to FOS that are worthy of note; a court judgement that allows a civil claim to be pursued, even after accepting the FOS settlement, and publication of the FOS budget for 2013/14, seeking an increase to the annual levy from regulated firms.

First, the case in the High Court upheld an appeal by two clients of In Focus Asset Management and Tax Solutions Ltd allowing them to sue in court for additional compensation, over and above the FOS limit.  This ruling goes against a High Court judgement from November 2010 (Andrews v SBJ Benefit Consultants), which confirmed that if a claimant has accepted an award of compensation made through FOS, they cannot then bring a civil claim in relation to the same matter.

FOS is now amending the wording on its website and in final decision letters to reflect this.

However, at this stage the two rulings contradict each other and may not be clarified until and unless the recent case goes to the Court of Appeal.

Next comes the FOS publication of its “Plans and Budget for 2013/14”.  Each January, FOS gives an update on complaint numbers and workload this year before detailing its proposals for next year.

The full document can be found in the link:

The essence is that FOS anticipates that during 2013/14, it will:

  • answer more queries;
  • work on more cases;
  • resolve more PPI disputes;
  • take on more case workers; and
  • appoint more ombudsmen.

And to do all this it will:

  • raise the individual case fee from £500 to £550, but increase the free number from 3 to 25;
  • introduce a new “group account fee” for the largest businesses;
  • retain the PPI supplementary case fee of £350, chargeable after 25 cases; and
  • increase the annual levy from £17.7m to £23m.

The blame for the increase in funding needed has once again been laid at the PPI situation, where complaints take up nearly two-thirds of its expected workload.  FOS also recognises that payment of the increased levy is likely to be made by many businesses that were never involved in the selling of PPI.

If the increased levy goes ahead, firms will potentially be paying nearly 30% more for FOS than last year.  For some firms, the move to 25 free cases might be seen as a positive but most firms will not come anywhere near that figure.

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