The Financial Conduct Authority has given the go ahead for the Financial Ombudsman Service's compensation limit to increase to £375,000.
At the moment the Fos is limited to awarding compensation to a maximum of £350,000 but the regulator has increased this once again.
From April 1 2022, the Fos award limits will change to £375,000 for complaints referred after this date about acts or omissions by firms on or after April 1, 2019.
For complaints before April 1, 2019, the compensation limit will be £170,000.
The Fos said: “Our award limit is the maximum amount we can require a financial services firm to pay when we uphold complaints. This limit is adjusted each year in line with inflation, as measured by the consumer prices index (CPI).”
For complaints referred to the Fos between April 1, 2019 and March 31, 2022 about acts or omissions by firms on or after April 1, 2019, the limit will be £350,000 and for complaints before this date, the limits will remain at £150,000.
In the FCA’s policy statement in March 2019, it said changes to the ombudsman service’s award limit will ensure more complainants receive fair compensation when the Fos upholds their complaint against a firm.
It estimates there could be up to 500 complaints upheld by the ombudsman service each year where the amount of compensation the service determines is due is above the previous award limit of £150,000.
The FCA said: “Previously, if firms did not voluntarily pay compensation above the award limit then complainants could be suffering an aggregate financial harm of up to £47.6mn per year.
“Complaints above the previous award limit typically involve insurance that protects consumers from a significant loss, advice on long‑term investments that provide an income in retirement, or the investments themselves. They also include relatively large commercial loans where the affordability of repayments can have a significant impact on the viability of the business that borrowed the money.
“We considered it unlikely that the individuals and businesses who are eligible to complain to the ombudsman service would have the means to pursue firms for unpaid compensation through the courts.”
The FCA first proposed the increase to £350,000 in October 2018 as part of its plans to expand the ombudsman's services to small and medium enterprises (SMEs).
The changes went ahead from April 1, 2019 which meant SMEs were able to complain to the Fos and, if the incident complained about took place on or after this date, they would be able to claim up to £350,000.
If it took place before April 1, 2019 the compensation limit was £160,000.
sonia.rach@ft.com
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