Faced with considerable increases in their levy to fund the Financial Services Compensation Scheme, and in their authorisation fees to the Financial Conduct Authority (FCA) and their professional indemnity insurance premiums, authorised firms may be cheered by the announcements made by the Financial Ombudsman Service (FOS) in early December 2015.
The independent complaints adjudication body revealed its plans and budget for the 2016/17 financial year at this time. The headline announcement as far as financial services firms are concerned is that once again the case fee has been frozen at £550, and again it will only be paid on a firm’s 26th and subsequent FOS case in any financial year, meaning that the vast majority pay no case fees at all.
Payment protection insurance (PPI) has dominated the FOS’s workload in recent years, and the organisation is still budgeting based on an expected 170,000 complaints about this product in 2016/17. It had budgeted for 150,000 PPI complaints in 2015/16, but now expects to receive 180,000 in the 12 months to March 31 next year.
The FCA has proposed a PPI complaints deadline in 2018, after which customers will be unable to submit new complaints. However, given the often significant time span between the complaint being submitted and the FOS making a final decision, it is conceivable that the product could form a significant part of the FOS caseload for the next six years. The introduction of the deadline could also cause PPI complaints to spike in the short term as consumers perceive that time is running out to complain.
The FOS has also underestimated its packaged bank account (PBA) complaint volumes. It now expects 40,000 PBA complaints in 2015/16, compared to the original budget for 30,000. Its budget for 2016/17 in this area covers just 15,000 new complaints.
The FOS is budgeting for 30,000 non-PPI insurance complaints and 15,000 pension/investment complaints in 2016/17.
The overall budget – the total cost of running the FOS – is expected to reduce slightly in 2016/17 to £223.2 million. The estimated final cost for 2015/16 is £227.2 million.
Authorised firms also contribute towards the ‘compulsory jurisdiction levy’, as well as paying individual case fees. The levy is expected to rise to £24.5 million in 2016/17, up from the existing £23.3 million, but it is impossible to know at this stage what the impact will be on the levy contribution made by individual firms. The FCA will publish more details on this in March 2016.
Chief ombudsman Caroline Wayman commented:
“We’re planning for another busy year at the financial ombudsman service – as the high level of complaints we’ve seen in recent years stabilises and we make good progress resolving cases ever more quickly and effectively.
“To help us do this, we’re working increasingly closely with financial businesses to continue to manage the impact of large volumes of complaints – and to plan for the inevitable volatility that can always impact the world of complaints.
“I’m confident that the foundations we’ve established in recent years – through investing in our people, our systems and the way we work – will give us the flexibility, efficiency and resilience to handle the challenges that the future might hold.”
A consultation on the FOS plans continues until February 2 2016.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.