The Financial Ombudsman Service today publishes for consultation its proposed plans and budget for the next financial year – together with an update on the numbers and workload for the current financial year.
The plans and budget set out how the ombudsman will need to gear up next year to:
- answer 1.4 million front-line consumer enquiries (1.2 million expected in the current financial year);
- take on 285,000 new cases (259,000 in the current financial year – a 25% increase on the previous year);
- settle more disputes involving mis-sold payment protection insurance (PPI) than ever before – a record 130,000 cases (half of our expected workload);
- respond to the continuing shift towards more complex and harder-fought cases – increasing the number of our ombudsmen to deal with the higher proportions of entrenched disputes requiring a final ombudsman decision.
To manage and fund this significantly increased workload, the ombudsman service is proposing to:
- control underlying costs tightly following a 10% cost-cutting programme in the current financial year;
- for the third year running, freeze both the £500 case fee paid by businesses for each complaint – and the amount paid under the levy by the financial services sector;
- continue to charge businesses only for the fourth (and any subsequent) complaint each year – so that three quarters of businesses with complaints referred to the ombudsman service again pay no case fees;
- charge businesses a supplementary case fee of £350 for each PPI mis-selling case referred to the ombudsman service – but chargeable only when businesses have more than 25 of these cases a year, reflecting where the costs are actually incurred in sorting out PPI mis-selling on this scale.
While consulting on its proposed plans and budget for dealing with the record complaints workload next year, the ombudsman service is also consulting on new arrangements for charging financial businesses for its work – which would involve a new case fee structure from April 2013.
This would mean:
- for the majority of businesses that have the lowest number of complaints referred to the ombudsman service: increasing the number of free cases from 3 to 25, so that only 1% of businesses pay any case fees at all.
- for the ten financial services groups that account for over 70% of our complaints workload: developing a new group-account arrangement that would more accurately reflect the total costs to the ombudsman service of the work generated by each group.
Commenting on the volatility and workload pressures that require the ombudsman service to gear up on an unprecedented scale, Tony Boorman, principal ombudsman, said:
"A year after the High Court ruling gave us legal finality on the approach that financial businesses should take on PPI complaints, it's disappointing that there's little finality for significant numbers of consumers who are still waiting for their bank or insurer to deal with their complaint.
"The delays and inconvenience that this causes consumers means the ombudsman now has to gear up for unprecedented demand and volatility in our workload.
"Our proposals to make sure we have the operational capacity to handle record volumes of cases involve those businesses who account for these complaints contributing the most to sorting out the problems.
"But in these difficult economic times – when consumers and businesses alike are tightening their belts and facing uncertainties – this is not welcome news for anyone."
Stephen Gay, Director General of AIFA, said:
"We have persistently pressed for a better deal for advisers, who represent a very small percentage of the FOS caseload.
"We are therefore pleased that the Ombudsman has recognised this and delivered a material benefit for IFA firms.
"We have been in discussion with FOS about the increase to the free case limit, which will now mean, in effect, that all but the largest IFA firms will not have to pay for cases referred to the Ombudsman.
"We need a fair and balanced dispute resolution service that works for both consumers and the financial services industry. At present the costs are not distributed proportionately across the industry. This is an important move to redress the balance."
