In its response to the Fos’ funding consultation published today (August 14), Pimfa heavily criticised the proposals to split the funding the Fos receives 50:50 between case fees and the levy.
In the consultation published last month, the Fos proposed the 50:50 split — a move from its current funding split of 85 per cent from case fees and 15 per cent from the levy.
The service said reducing its reliance on income from case fees would help it manage the increasing number of more complex cases and even out the workload.
But the proposals have come under criticism from those within the industry. The Building Societies Association slated the reforms just this week, stating the proposals would see costs for companies with fewer complaints "soar" while those with larger volumes would see their costs fall.
Pimfa’s complaints mirror those from the BSA. The trade body stated the new structure would result in firms which generate fewer complaints “greatly subsidising” firms which account for the majority of complaints to the ombudsman.
The trade body highlighted the proposals as “unfair and disproportionate” through its response, in which it told the Fos it was in favour of a “polluter pays” model, meaning the majority of Fos’ costs should be covered by case fees.
It added the Fos should rework its proposals so the costs recovered by means of a levy were as low as possible.
Pimfa stated: “The current proposal is not fair or proportionate; it penalises firms with a small number of complaints and provides little incentive for firms receiving a high volume of complaints to modify their behaviour or improve their complaint handling.”
Ian Cornwell, director of regulation at Pimfa, also criticised the Fos for setting a response time of only six weeks for the consultation during the summer period.
He wrote to the service: “The timescale of six weeks to respond to the consultation is too short, particularly during the summer holiday period.
“Trade associations need to consult with their members and committees and working groups generally meet on monthly cycles.”
Other suggestions within Pimfa's response included a shake up of complaint categorisation as the current order was “rigid” and “not particularly helpful in readily identifying sector specific trends”.
It said its members were keen to obtain meaningful information from the Fos on emerging issues in order to mitigate any future complaints.
Pimfa also wanted Fos data to show how many times, how often, and why an ombudsman had departed from the law in their decision.
It wrote: “We would like to see the complaints data give an indication as to the number of times an ombudsman departs from relevant law together with overall trends in respect of such departures.
“There is a widespread perception amongst some stakeholders that Fos is above the law and there is little evidence provided by Fos to enable stakeholders to ascertain whether or not this perception is correct.”
Pimfa also saw “no reason” why the service should be based in London, and noted there could be a cost benefit to moving the Fos out of the city, and raised concerns about the length of time certain cases were taking to be resolved.
It told the Fos it would like to see data on the cases still outstanding after one and two years.
Martin Bamford, managing director at Informed Choice, said: "Retail financial services is full of unfairness and cross subsidy.
"If the regulator and its various bodies can’t treat regulated firms fairly, it sets a stage for unfair treatment of consumers by these regulated firms.
"We already have a ridiculous level of cross subsidy with Financial Services Compensation Scheme levy funding and it’s a real shame Fos is following suit with this proposed model."
The FSCS levy has been a hot topic in the industry since some advisers saw their regulatory bills jump as much as 30 per cent, primarily due to FSCS costs.
Paul Gibson, managing director at Granite Financial Planning, agreed with Pimfa that the Fos fees should be borne by those who generate the most complaints.
He said: "The 50:50 proposal is inherently unfair and is a further tax on the good firms who try to do things properly.
"As final salary transfers are inevitably going to be an issue in coming years I also think providers should pay more in fees as they have benefited hugely in recent times from inflows.”
imogen.tew@ft.com
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