FCA committee expresses concern over Fos reforms

FCA committee expresses concern over Fos reforms

The Financial Conduct Authority committee responsible for overseeing the Financial Ombudsman Service has expressed concern about the complaints body's ability to adapt to an expanded remit.

Last month the FCA published its plans to allow small and medium-sized enterprises (SMEs) to lodge complaints with the Fos from April 1, 2019.

But minutes of the FCA's board meeting released today (November 9) reveal the regulator's oversight committee, which is responsible for overseeing the Fos and reviewing its plan and budget, had expressed concerns about the timing of the changes.

Article continues after advert

The plans to expand the Fos's remit came just months after the organisation faced an independent review by Richard Lloyd into the way it handled complaints, which found the service had struggled with the demands of its recent reorganisation and the large number of payment protection insurance (PPI) complaints it has been receiving.

Since then the Fos has set out plans to address the issues the review raised, involving a review to check cases against relevant standards and a further review of historic cases.

The minutes of the FCA's September board meeting said: "The oversight committee met in September to consider the extension of the jurisdiction of the Fos to include complaints from SMEs and award limits.

"The committee concluded that in principle it supported extending the jurisdiction of the Fos to include SMEs and a consultation to increase the overall limit on awards. However, the committee felt that further work was required to determine the timing of these changes and whether they should take effect simultaneously.

"The committee wished to understand how Fos would develop its plans to adapt to the proposed changes as part of the overall development plans for the organisation. The committee also requested written confirmation of current progress in implementing the recommendations from Richard Lloyd’s independent review."

This is not the first time concerns have been raised about plans to expand the Fos's remit.

In July Nicky Morgan, chairman of the Treasury select committee, said she was "doubtful" the Fos would be able to handle an expanded remit in light of the findings of the independent review.

The expansion of the Fos to SMEs follows a review of the protections available to these businesses as users of financial services which began in 2015, and the case of the treatment of small businesses by Royal Bank of Scotland turnaround unit, which was accused of artificially distressing otherwise viable businesses.

The changes will mean that SMEs with an annual turnover below £6.5m and fewer than 50 employees, or an annual balance sheet below £5m, will be able to refer unresolved complaints to the ombudsman service.

It means around 210,000 additional SMEs will be eligible to complain to the Fos.

As part of these changes, the Fos will increase its compensation limit from £150,000 to £350,000 if the incident complained about took place on or after April 1, 2019.

If it took place before 1 April 2019 the compensation limit will be £160,000.