The Financial Ombudsman Service plans to reduce its budget by 20 per cent for the upcoming financial year, which is largely the result of the scrapping of a £350 supplementary fee for payment protection insurance complaints.
In its consultation paper on the 2014/2015 budget, Fos said it will be scrapping the PPI supplementary fee as it now have all the resources in place to tackle the large amounts of payment protection insurance cases.
This mainly affects banks, but Fos said it will also affect the smaller number of advisers that sold PPI and that have been subject to complaints.
Fos plans to maintain the industry levy at its current level of £23.3m, “ensuring the overall cost to the financial services industry is no more than this year”.
It also plans to extend the group-account charging arrangement to a further four of the largest businesses, so that around three quarters of the expected workload will be paid for on this basis by the businesses whose customers use the ombudsman the most.
The group-account fee was introduced last year for the Fos’s largest users to reflect their contribution to overall costs.
This meant that it applied to the four major banking groups that, at the time, accounted for around 60 per cent of the Fos’s caseload. Rather than pay in relation to individual cases, group-account fees are determined in advance and a quarterly fee is set based on the overall level of expected work from each group.
Fos hailed the group-account fee as a success, adding that the four major banking groups who have paid it have welcomed its transparency and predictability.
The Fos has also proposed freezing the case fee paid by businesses at £550, payable only after a firm’s 25th case has gone to the Ombudsman. The Fos said the “vast majority” of businesses will continue to pay no case fees.
Tony Boorman, interim chief executive and chief ombudsman, said: “For the last few years our focus has been on building up our capacity to meet the unprecedented challenges of PPI.
“The investment we have made in scaling-up and developing our service is now paying off as we plan for another year of record activity, resolving twice as many PPI cases as we receive. But we’re not out of the PPI woods yet.
“While we expect the volumes of PPI complaints to decline, the numbers are still likely to be substantial. Our plans take this into account – but we will still be relying heavily on the patience of consumers and the cooperation of businesses, before we will be able to draw a line under the PPI saga.
“Across all of our work we continue to hear that people’s dealings with financial businesses remain strained, suggesting a lot more work is required to restore consumer trust in financial services.”
The deadline for views and comments is Monday 17 February 2014.