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FSA to increase FOS levy by £25m due to PPI review

The FSA has approved a £25m industry levy increase to allow the Financial Ombudsman Service to boost its reserves to deal with an expected surge in payment protection insurance complaints.

The levy will apply to firms under the FOS’ “compulsory jurisdiction” which the FSA defines as firms authorised and registered by the FSA, including those who have not had cases referred to the FOS.

An FSA spokeswoman says no decision has been made about how the levy will be allocated. It is expected to be allocated to different fee blocks in May.

In the FSA’s consultation paper on regulatory fees and levies, published in February, the regulator calculated the impact of a £47.7m compulsory jurisdiction levy on firms, including an additional £30m to boost FOS’ reserves.

The regulator proposed 39 per cent of the levy would be paid by banks, building societies and mortgage lenders, 37 per cent would be paid by general insurance intermediaries, and 12 per  cent by general insurers. The advisory arrangers, dealers and brokers fee block, which includes the majority of IFAs, would pay 4 per cent of the levy.

This would mean an indicative bill of  £18.7m for banks, building societies and lender, £17.6m for GI intermediaries, £5.9m for GI providers, and £2m for advice firms.

In January as part of its annual plan and budget consultation for 2011/12, the FOS revealed it was seeking a levy increase of up to £30m.

The ombudsman said at the time that the loss of income from case fees as a result of a judicial review launched by the British Bankers Association in October could lead to an operating monthly deficit of up to £4m, which would exhaust its reserves within six weeks.

A FOS spokeswoman told Money Marketing in January that the FOS would recommend to the FSA that the additional levy be attributed to the fee block that generates most of the FOS’ workload. For PPI, this would be banks and other PPI providers.

The FOS has announced today that the FSA has approved an operational budget for the FOS of £102.9m  for 2011/12.

The budget allows the FOS to freeze the £500 case fee, paid after three cases, for the second year running.

The £25m levy to boost the FOS’ financial reserves is on top of the £102.9m FOS budget.

The FOS says: “We believe that increasing our reserves is prudent and necessary in order to manage our financial risks in 2011/12.

“It is important to ensure that these additional reserves are used to deal with volatility and are not used to address ‘business as usual’ issues or any shortfalls in efficiency.”

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Comments

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

  1. I love the FOS. I think they deserve every penny they prudently spend. An increase of only 30%? i think they should push for 50%.

  2. So as a small IFA and Insurance Broker, I fall into two blocks, this is just the increase forgetting all other fees! Bottomless pit is OK for regulators and Banks but small businesses have to hold the required Solvency as dictated by the very people who are taking more and more of our capital, (YES Capital as we have to pay all of this before we can earn anything). We then earn enough to replace our capital which is tax relievable; (IFA IB) cost 80% HMRC 20% 2011 smaller companies’ rate.
    We only then start to make profits on the last 30% of our turnover.
    I wonder if the Treasury understand that they are loosing a fortune by allowing the FSA to Impose a Stealth Tax on business of 100% with the treasury funding 20% of it …. Instead of us paying corporation tax on the profits we could have made??? Same thing applies to the FSCS and FOS payments as they are tax deductable.

    Peter and Paul come to mind, but Mary (for the older generation into contemporary Folk music) takes 2/3rds.

  3. Even 4% sounds too much to me. How many advisers, Independant or Tied, have ever arranged PPI?

  4. It is time to to take a stand against this extortion racket.
    When do we march?

  5. we have never in all the years sold a PPI policy, this is, yet again, so unfair!

  6. Wasn’t it the banks that mainly sold this through their bonus driven sales forces who didn’t ask many questions and certainly never knew anything about the people they were pushing products onto.
    Banks have been responsible for much of the mess we are now in so I guess we’ll have to help bail them out on this too.

    Bless them

  7. So the banks miss-sell PPI – our bank forced me into a PPI as a condition of our overdraft – long since repaid. And the PPI was miss-sold!

    Is it that the total compensation has gone over the limit for banks and intermediaries now have to pick up part of the tab for BANK miss-selling?

    Why aren’t FSA & FOS forcing the miscreants to pay up for the total costs their misdeeds instead of forcing us to fork out?

    Banks must be laughing all the way to themselves!

  8. As I understand it, a large part of this shortfall has arisen due to the banks refusing to pay any more case fees whilst they pursue legal action on the grounds that this is yet another example of regulation by hindsight.

    Will they also, for the same reason, refuse to pay any additional levies? If so, the FOS will either have to halt all work on referred PPI complaints or, instead, it’ll seek to bill everyone else for what it can’t screw out of the banks. What if everyone else refuses to pay? A major showdown may be brewing.

  9. Yep we are used as a cash cow, why do I bother ?

    Never sold any of these products or any structured key data stuff yet I still have to be fined,taxed or any other word you may label it.

    Why do we have PI ?

    Time we all stand together on this

  10. Is it just me, or is it ‘here we go again’? All week we’ve read about the complaint stats and, as always, the banks occupy all the top slots. They MUST be responsible for about 95% of all PPI complaints but, yet again, we’re ending up paying a bit slug towards them…..I could always buy some bank shares, I suppose, that might make me feel better…not.

  11. So, the FSA and FOS are still trying for force small IFA firms out of business. Levy’s and fees going up, the loss of “legacy commission” the switch to fees (which may or may not attract VAT), legislation and reviews based on hindsight…… I used to think that the former bankers that run the FSA wanted all business to go to the banks, but they don’t want the average man in the street only HNW clients. At this rate there will be no financial services industry, just NEST and execution only websites. What will the well paid staff of the FSA pick on then?

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