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FCA confirms FOS compensation limit hike

Andrew-Bailey-Conference-Alt-2013-700x450.jpgThe Financial Ombudsman Service compensation limit will increase from the current £150,000 to £350,000 from 1 April, it has been confirmed today.

In a policy statement, the FCA says the development will allow the ombudsman to require financial services firms to pay significantly more compensation to consumers and businesses.

From 1 April, the current £150,000 limit will increase to £350,000 for complaints about actions by firms on or after that date.

For complaints about actions before 1 April that are referred to the FOS after that date, the limit will rise to £160,000.

The watchdog has also confirmed that both award limits will be automatically adjusted every year to ensure they keep pace with inflation.

The new award limit will come into force at the same time as the extension of the service to small and medium-sized enterprises, not just individual complainants.

This will include firms with fewer than 50 employees, annual turnover of under £6.5m and an annual balance sheet total of under £5m.

An additional 210,000 SMEs will be able to complain to the FOS.

FCA chief executive Andrew Bailey says: “Consumers and small businesses struggle with the cost and time needed to take firms to court, so it is essential they can receive fair compensation from the FOS when things go wrong.

“We have listened carefully to the feedback we have received and believe our approach is right and will bring benefits to both the consumers and micro-enterprises currently eligible for the ombudsman service and the small businesses who will become eligible in April.”

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Comments

There are 13 comments at the moment, we would love to hear your opinion too.

  1. Does this regulator want to see more firms go out of business?

    “We have listened carefully to the feedback we have received and believe our approach is right”

    Really? What feedback and from who?

    This sounds a lot like Lord Meltchett’s Court Martial of Blackadder.

    Blackadder’s court martial was less than fair, since Melchett was the judge and Darling the prosecution. Meltchett opens by saying, “The case before us is that of the Crown versus Captain Edmund Blackadder, alias the Flanders Pigeon Murderer. Oh, and hand me the black cap, will you – I’ll be needing that.”

    Now that’s consultation?

    I rest my case.

  2. The increase from £150k to £160k is already more than twice RPI, and more than three times CPI!

  3. Just at a time when compensation claims are coming from every direction, DB transfers, SIPPs, unregulated investments etc.

    So much for Pensions Freedoms for the right clients, PI insurers will kill the market for DB transfers particularly, how will the FCA explain the loss of lucrative tax revenue to the Treasury?

  4. It wasn’t a consultation FCA had already decided they were going to do this.

    We are faced with a scenario where;

    The FOS compensation limit is more than three times as great as a legal claim that would be dealt with by a Crown Court or the High Court with all the protections in law that offers;

    Where a complaint is dealt with by an organisation that has an “inquisitorial remit” (has the right to make up complaints not made by the client);

    Other than a failure of process the adviser has no right of appeal;

    An organisation that by its own admission doesn’t deal adequately with 1:12 of the complaints it receives.

    The suggestion, reported elsewhere is that PI costs to the intermediary sector could rise by 500%

    You really couldn’t make this stuff up. I would laugh if it were not so awful.

    The consumer deserves a robust Ombudsman services it’s just they don’t have one

    • Quote from the report “Although we do not expect it to materialise, we have modelled a ‘worst-case’ scenario,
      based on PII premium increases of between 200% and 500% forecasted by insurers.
      This contrasts with our own estimate of 140% based on our upper estimate of
      additional liabilities.”

      I’m sure the FCA know more about the market for PI than insurers so we can rest easy knowing it’s only 140%.

      If you wait a few days there will be another missive from the FCA bemoaning the level of costs inflicted on clients… irony is alive and well in Stratford!

  5. “FCA chief executive Andrew Bailey says: “Consumers and small businesses struggle with the cost and time needed to take firms to court, so it is essential they can receive fair compensation from the FOS when things go wrong.”

    “Fair compensation from the FOS” – there’s the rub. The compensation comes from the firm and is very often incredibly unfair and a product of either a lack of understanding from FOS staff or a willingness to give the benefit of every doubt to the consumer with no evidence, but to disregard most of what the firm says, even though it was the business engaged with the client. This is extremely unwelcome news for the industry and to call it a consultation seems a bit wide of the mark. The FCA want to do it. They consult. The vast majority of the industry says “you shouldn’t do it”. The FCA does it anyway. Consultation over.

  6. Not at all sure how raising the ‘compensation’ limit will help, as we already know that most firms with sizeable liabilities in this area of business (as well as some others) will just go bust and dump any liability on the FSCS as their PII goes unpaid and becomes invalid. When I say the FSCS I actually mean our clients, as they are really the ones who will pay after all!

    Some discussion that was

    • Quite. For a complaint to be considered by the FOS, it will already have been rejected by the firm complained against, presumably on the advice of their PI insurers (all complaints that could lead to a claim being immediately notifiable events).

      Are PI insurers obliged to pay out in accordance with a FOS award even if they declined the claim initially? If not, the award will be a guaranteed death sentence.

  7. Beyond a joke! After 22 years of regulation we shouldn’t need compensation funds for ‘bad advice’unless the regulator is asleep at the wheel again. We are being asked for more fees year on year whilst those at the top reward themselves with ridiculous salaries and bonuses foe achieving very little. Quite clearly the RDR failed!!

  8. One has to wonder what the hell these people see when they look out of their windows ?

    Is it some Dystopian world where the financial services walk around as zombies feasting on all in their path ?

    Or

    Is it, they are sadistic, sycophants, bathing in the pleasure of the suffering of those below, and lickspittling their false idols at the treasury ?

    Its the only logical explanations for them constantly doing the wrong thing !

  9. I will look at our PI renewal when it arrives in May and decide how to proceed. If it has risen substantially it will have to be reflected in higher client fees going forwards.

    I suspect the FCA’s boast of the £500m saved by Mifid II could well be eaten by this very silly move.

    The FOS is for small claims. To allow claims of £350K without appeal is just plain wrong.

  10. Let’s get the lack of an appeal and legal process in to proportion. This basically means that the FOS can take 1 1/2 x the average person in the UK’s home away from them without any appeal provided they are a regulated financial adviser who hasn’t incorporated.
    see https://www.gov.uk/government/news/uk-house-price-index-for-april-2018
    The UK House Price Index (UK HPI) shows house price changes for England, Scotland, Wales and Northern Ireland. The April data shows: on average, house prices have risen by 1.2% since March 2018. an annual price rise of 3.9%, which makes the average property in the UK valued at £226,906.
    Now, as a quasi legal system, do they not realise taking the roof from someone’s head based on hearsay might result in an extreme reaction from those denied justice?

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