The Financial Conduct Authority (FCA) has lost sight of both its own and the Financial Ombudsman Scheme’s (Fos) purpose, a trade body has said.
The Association of Mortgage Intermediaries (AMI) "strongly opposes" the regulator’s plan to increase the maximum compensation limit of the Fos from £150,000 to £350,000, as proposed last week.
The FCA wants to increase the compensation limit as part of its plans to extend the ombudsman's remit to handling complaints from small and medium enterprises (SMEs).
But the AMI noted the Fos' initial purpose of settling cases speedily and by "using dispute resolution techniques to gain agreement" was not served if the compensation limit is more than doubled.
It said cases above the current limit should be dealt with in courts using legal decision making based on contract law.
Robert Sinclair, chief executive of AMI, said accessing dispute resolution for such significant cases on a fair and reasonable basis rather than a proper legal dispute procedure through the courts was inappropriate.
He said: "Just because there are examples of higher claims being paid out does not warrant a radical increase to the Fos limit.
"Even most of the respondents who agreed to the extension of Fos' eligibility to include larger SMEs did not support an increase to the limit, with only three suggesting that it should be that high.
"Relying purely on data analysis is not a sufficient justification. It was always considered that higher value disputes with complex arguments should be the subject of legal remedy rather than Fos."
A consultation on the matter closes on 21 December. If implemented the changes will take effect from 1 April 2019.
Mr Sinclair said the AMI will respond to the consultation accordingly and encouraged individual firms to do the same.
An FCA spokesperson said: "It is only right that these larger SMEs, charities and trusts, and personal guarantors of loans to a business should have access to the ombudsman service.
"Until now they haven’t had an avenue to resolve disputes without a costly route through the courts. It is disappointing the AMI want to prevent these firms from being able to challenge decisions."
Under the proposed changes SMEs and individuals will be able to claim up to £350,000 in awards if the incident complained about took place on or after 1 April 2019.
If it took place before 1 April the compensation limit will be £160,000.
Both limits will be increased by consumer prices inflation every year to make sure consumers and small businesses receive adequate compensation.
Last week the adviser forum Panacea Adviser called on advisers to oppose the proposed increase, warning the increase could spell the death of the small IFA.
Ray Boulger, senior mortgage technical manager at John Charcol, said extending the limit was questionable and that he "wholeheartedly" agreed with the AMI's statement.
He said: "The FCA should be including cost-benefit analysis with its proposals and unless it can produce data which justifies the compensation increase then the industry as a whole needs to be united in its response to the consultation.
"I hope it will be a genuine consultation and if the regulator receives a lot of responses that make clear the proposals are inappropriate, they will be amended accordingly."
rachel.addison@ft.com
