Big rise is planned for free ombudsman cases

The Financial Ombudsman Service is proposing to increase the number of free cases that firms are allowed before having to pay a case fee from three to 25 per year.

Currently, firms have to pay a £500 case fee for the fourth and each subsequent case referred to the FOS over the course of a year.

The FOS published a consultation paper last week on increasing the number of free cases so firms with 25 complaints or fewer referred to the FOS during the year would not incur a case fee. If agreed, the new case fee structure would be introduced from April 2013.

It calculates this proposal would result in just 1 per cent of businesses paying any case fees. Network members will continue to be liable for case fees as the free cases will apply to the network as a whole.

Large businesses with over 2,000 cases referred to the FOS in one year would not qualify for any free cases but would be subject to a new group account arrangement aligning fees to the amount of work generated by each company.

The ombudsman service is also consulting on charging a supplementary case fee of £350 for payment protection insurance complaints from April 2012 where businesses have more than 25 PPI complaints referred in a year.

The FOS says: “We believe significantly increasing the number of free cases would be a desirable change to our case fee model. We believe this can be achieved without undue disruption to our charging structure only if businesses in the biggest financial groups do not benefit from this increase.”

Highclere Financial Services partner Alan Lakey says: “In an ideal world, there would be no case fee but a product levy to cover FOS costs. However, the increase in free cases is a step in the right direction, and brings about a fairer way of collecting fees.”

Main proposals from the FOS on reforming case fees from April 2013

  • Increase the number of free cases from three to 25 a year
  • Smaller businesses would contribute to FOS costs through the existing industry levy but would not have to pay any case fees
  • Medium-sized businesses would continue to pay a combination of industry levy and case fees
  • Large businesses which have over 2,000 cases referred to the FOS each year would not qualify for any free cases
  • Large businesses would instead pay a quarterly fee in advance based on the costs generated by each business, for example, a business that generates 10 per cent of the FOS’s workload should pay 10 per cent of the FOS’s costs
  • A supplementary case fee for PPI cases of £350 from April 2012 for businesses with over 25 PPI cases referred to the FOS in a year