Claims management companies accounted for nearly half of all cases received by the Financial Ombudsman Service during 2011.
Figures cited in a review of the FOS by the National Audit Office, published today, show claims management firms generated 45 per cent of FOS cases last year, compared to 43 per cent of cases that came directly from consumers (see table below).
The number of complaint cases referred by CMCs to the FOS is up 17 per cent on 2010, when 28 per cent of cases came through claims firms, and 27 per cent since 2007, when claims firms accounted for 18 per cent of cases.
The bulk of complaints from CMCs last year related to payment protection insurance complaints.
The NAO review also notes that FOS operating costs have risen 214 per cent in real terms over the last nine years from £27.2m in 2001/02 to over £100m in 2010/11. The growth in the number of cases converted to complaints grew 376 per cent over the same period from 43,330 cases to 206,121.
In 2010/11 the industry paid a total of £122m to cover the costs of the FOS, made up of £77m in case fees, £20m through the FSA industry levy, and a further £2m to boost the FOS’ reserves to cope with the surge in PPI complaints.
The FOS is falling short of its target to resolve half of cases within three months, with only 41 per cent of last year’s cases resolved in this time. A further 40 per cent of last year’s cases were resolved withing three to nine months, while 5 per cent of cases took over 18 months to resolve.
The NAO recommends the FOS should do more to understand the reasons for delays within the complaint-handling process, and work out the maximum number of cases staff can work on at any one time.
It also recommends the FOS should examine whether its current charging structure is “fit for purpose”, and consider charging firms when an enquiry to the FOS is converted into a complaint to be investigated, rather than when the case is resolved.
The FOS published a consultation paper last week on reforming its case fee structure from April 2013.
It has proposed increasing the number of free cases firms are allowed before they have to pay a £500 case fee from three to 25 a year. Larger firms with over 2,000 complaints referred to the FOS a year would not qualify for the free cases, and would instead to be subject to a different charging structure reflecting the amount of the FOS’ workload they generate.
Separately the FOS is planning to increase staff numbers by a third to 2,545 and is forecasting a 75 per cent jump in operating costs from £113.1m for 2011/12 to £197.6m for 2012/13.