Fos reveals £17m case fee shortfall

Case fees paid by firms subject to complaints to the Financial Ombudsman Service totalled £102.6m in the 2012/2013 financial year, leaving a £17m shortfall against the £119.6m budgeted for the 12 month period.

According to Fos’s annual results, the shortfall was more than made up by income from the new supplementary case fee introduced for PPI complaints - charged for the 26th and all subsequent cases received by a firm during the year - which generated £126m, more than double the £52.4m budget.

Case fees were charged at £500 in the 2012/2013 financial year, while the supplementary PPI fee was £350. Standard case fees have risen to £550 for the 2013/2014 financial year, with the PPI supplementary charge unchanged.

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This meant that in total Fos recorded case fee income of £228.6m for the 12 months, representing 87 per cent of its total income of £249.4m. The remainder was made up of the £20.8m levy on financial firms, £1.1m more than the £19.7m budget.

Fos case fees have proved controversial in the past, particularly among advisers that are members of networks, who often do not benefit from the free case fee allowance that is applied at company level.

Changes made last year mean a firm is not charged a case fee for the first 25 cases it receives in a given year, however for networks this allowance applies to the company as a whole and many adviser firms are therefore charged for their first claim.

Following a consultation on its case fees launched last year, Fos rejected calls from network advisers to revise its stance and apply the free case fee allowance at the level of individual firms, saying that this was only supported by a minority of respondents.

In its accounts, Fos says that in line with accounting standards it has deferred much of the supplementary case fee income received into future years to cover anticipated costs.

The service says it therefore recognised “only 10 per cent of the total fee (£85) on conversion of the case, with the remainder of the fee released to income when the case is closed in a future period”.

The Fos said this approach means it has only released £39.5m of the £126m with the remaining balance shown as deferred income.

The accounts reveal Fos spent £162.6m on administrative costs, compared to a budget of £198.3m. Pay for the executive team, made up of seven individuals, was £1.4m, including salary and other benefits.

Natalie Ceeney, chief executive, received a £19,620 pay rise in the latest financial year. She received £256,064 in the year ending 31 March 2013, which was made up a £222,000 salary, £27,912 pension contributions and other benefits of £6,152.