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FSA delays changes to FOS funding due to case number volatility

The FSA has delayed any proposals to reform the funding of the Financial Ombudsman Service due to “significant volatility” in case numbers experienced by the FOS.

The industry were expecting a firm commitment from the regulator to radically reform the FOS’s funding requirements to address the perceived unfairness in the system.
Aifa is calling on firms to be allowed 10 ‘free’ cases a year-compared to the current two- with a flat annual fee of around £230 levied on all firms and a case fee of £480 charged after the 10th complaint.
But the FSA says the FOS is about to experience significant volatility in case numbers due to a number of reasons, such as a greater than anticipated decline in the number of mortgage-endowment cases.
The FSA says: “It is not possible to model with any degree of certainty how significant changes at this stage would affect both the financial stability of the FOS and any alternative distribution of costs among firms.
“So the FSA and FOS do not believe this is a suitable time to implement any radical changes to the funding of the FOS”.
The FSA’s feedback statement, released today, said there was general support for increasing the number of ‘free’ cases and for the case fee to fund a greater proportion of the FOS’s expenses.
The statement also says it will see what scope exists for moving towards this direction when agreeing the FOS’s budget for 2008-09, towards the end of 2007, but goes no further in committing to any changes.

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