The funding structure of the Financial Ombudsman Service will need to change to reflect a wider jurisdiction and fewer future payment protection insurance (PPI) claims, the chairman of the Financial Conduct Authority has suggested.
Speaking at a Treasury select committee accountability hearing today (January 15), Charles Randell said the ombudsman has indicated it will fundamentally look at its funding this year as it migrates away from a "heavy PPI claims" workload.
Mr Randell said while the ombudsman’s work on PPI would not end with the claims deadline on August 29, the scale of its activity in this area would eventually reduce.
He said: "As the scale of PPI activity comes down, the ombudsman’s financial requirements and funding structure will need to change to reflect a more heterogeneous flow of cases. It will also get new jurisdictions as well."
The comments were made in response to a question from the committee as to the sustainability of the current method of funding the ombudsman.
Mr Randell said the FCA’s oversight committee had widely discussed funding with the ombudsman and sustainability had also featured in the recommendations made in Richard Lloyd’s independent review of the service last year.
Mr Randell added: "We need to look at their cost base, extent to which it is fixed, extent to which it is variable, where it comes from and who should bear those fees."
When asked where the balance for funding the FOS on an ongoing basis should lie, Mr Randell said he was unable to answer the question as the issue was still a "working process" on which the ombudsman would bring forward plans for a new funding structure to be widely consulted on.
Mr Randell advised that the ombudsman’s plans to prepare for the expansion of its services to small and medium enterprises (SMEs) have been discussed with the regulator’s oversight committee and appeared to be on track.
The Treasury select committee heard that the FCA’s current level of oversight remained "very high", with Mr Randell commending the consumer service provided by the ombudsman.
He said: "The ombudsman provides an incredibly valuable service to people who have absolutely no access to a dispute resolution service without the ombudsman, and I think the vast majority of people who use the service benefit from it enormously.
"It is in the nature of what they do, where one party may dispute the adjudicator, that one party will feel hard done by.
"But they do that job and they do it well and it’s absolutely vital that they do it."
rachel.addison@ft.com
