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FOS freezes case fee and industry levy

The Financial Ombudsman Service has proposed freezing its case fee for 2011/2012 and freezing the total levy paid by the financial services industry for the second year running.

The FOS has published its annual consultation on its plan and budget for 2011/2012 today.

The proposal means that the case fee – paid for by a minority of firms that have four or more complaints referred to the ombudsman service during the year – will be frozen at £500.

The FOS says it plans to achieve this by absorbing inflationary pressures and additional case-handling costs, and by making savings to investment in the service’s future development.

It expects to set a budget for 2011/2012 totalling between £90m and £116m, but says this is based on demand levels falling.

The FOS’ unit cost for 2010/2011, which represents the ombudsman’s total costs divided by the number of resolved cases, works out to be a little over £600.

This is around 10 per cent over budget.

The ombudsman plans to reduce its unit cost to below £600 next year, involving a cost-savings exercise to cut its cost base by around 10 per cent.

The FOS also says it has seen around a 40 per cent increase in the number of cases involving payment protection insurance during the current financial year.

The FOS says: “Dealing with the unexpected additional volume of PPI cases has had a significant financial impact, as well as an operational impact on our service over the past year.

“This is likely to result in our financial reserves reducing significantly by the end of the current financial year (2010/2011).”

The ombudsman says it is difficult to forecast the number of PPI complaints it will receive over the coming year, particularly due to the BBA’s recent judicial review.

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