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Bank action left FOS with £7m deficit

The Financial Ombudsman Service was landed with a deficit of £7.6m due to high-street banks’ failure to co-operate on payment protection insurance complaints.

Unaudited figures reveal that for the year to March 31 the FOS had a £7.6m deficit, nearly four times as much as the £2m deficit that had been budgeted.

In an interview with Money Marketing, chief executive Natalie Ceeney attributes the deficit to a lack of co-operation from the banks as a result of the judicial review challenging PPI redress measures.

She says: “From when the legal action started in the autumn, many of the major banks said they would not co-operate on case handling. We kept seeing complaints but our ability to resolve cases plummeted.”

Ceeney says by Christmas the FOS was aware its budget would not cover the cost of dealing with PPI complaints. The FSA agreed a £25m industry levy to boost FOS reserves in March.

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Comments

There are 11 comments at the moment, we would love to hear your opinion too.

  1. David Parkinson 23rd June 2011 at 12:51 pm

    No doubt the IFA’s will pick up the tab for this one as well?!!!!! No MP’s on our Board!

  2. Maybe it time the IFA network became a cooperative and create the National IFA Banking Group… lead this shower by example… wouldn’t that be a worthy “Carling” moment.

  3. If Ms Ceeney is factally correct, then the levy should not be made against the industry, but against the specific banks who took a stance of non-cooperation and have caused the shortfall. Authorised firms do not have their fines spread across the industry, why should banks who have been found to be guilty in this regard, also have failed in their financial crime responsibilities of PEPs / high risk individuals have everyone else pay for their incompetence and cowboy selling strategies.

  4. Anthony.
    Great comment and can I take it one step further? How about creating our own professional association/trade body which guaranteed to levy its own fees for regulation and for compensation. FSA appears ineffectual in its inability to regulate (witness the many misselling episodes that it has missed and the near systemic breakdown while it was on duty) and the FOS appears to be being brought down by bank mis-selling. The IFA accounts for a very small proportion of complaints upheld, so why shoudl we associtate with either ineffective regulators, banks that lack integrity and underbudgeted FOS?

  5. If the banks get away with this, what is there to stop them doing again over other misselling.
    IfA,s must stand up against this. theft from people who do not cause problems. Combined with the FSA the banks are doing a fantastic job of getting rid of the IFA industry. I wonder if this was the whole agenda of the FSMA act of 2000

  6. Yes but what the FOS is not saying here is that a large proportion of PPI complaints are sub contracted out to major Accountancy/Consultant firms. This must dramatically increase their costs.

  7. She says: “From when the legal action started in the autumn, many of the major banks said they would not co-operate on case handling. We kept seeing complaints but our ability to resolve cases plummeted.”

    By the same token IFAs should refuse to cooperate if asked to contribute towards the levy.

  8. The one thing that really stands out on this is the non co-operation of the banks !!!

    If this was an IFA he would have his permissions striped and publicly labeled “not a fit and proper person” or “not conducting his business soundly” and “not compliant” Etc Etc

    Makes me sick !!

  9. And the banks must be made to find that money!

  10. I often think, like Stephen | 23 Jun 2011 1:22 pm, that IFA’s should have their own personal regulator. One preferable made up of ex ifa’s so that they can actually understand what we do and how we work.

    The majority of IFA only pose a very minimal risk (even the FSA accepts this) but somehow we are the ones being regulated into the ground while banks seem able to disregard the rules and do what they want.

  11. Polluter pays?

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