The Financial Ombudsman Service has shaken up its funding plans for the next year in light of the coronavirus crisis, saving firms within its remit a combined £25.4m.
The Fos announced today (April 1) it had revised the arrangements for the 2020/21 year as it recognised the pandemic’s “unprecedented impact on firms” and the “clear increased potential for financial hardship and vulnerability”.
Changes include adapting the overall income the service takes to a 70:30 split, with 70 per cent coming from case fees and 30 per cent from the levy.
The Fos had previously proposed a funding model with a 50:50 split but later shifted to a 60:40 divide — meaning firms with higher case numbers still paid slightly more — after a string of industry bodies criticised the change.
It will maintain the number of ‘free’ cases at 25 for firms not in a “group arrangement” instead of cutting the allowance to 10 for such companies, while a reduction in the number of free cases from 125 to 50 for larger firms in a “group arrangement” will go ahead as planned.
The Fos predicted nine of 10 firms would not pay any case fees at all over the next year.
It has also asked the Financial Conduct Authority to freeze all minimum levies at 2019/20 levels, but has upped its case fee price tag from £550 to £650.
The Fos said these changes would cost the service about £25.4m in total and the funds would come from its reserves.
Its wider plans for the next year, including its final budget and a summary of consultation feedback, will be published next week.
Chief ombudsman & chief executive Caroline Wayman said: “The Covid-19 crisis is unprecedented and at the moment, it’s simply not possible to anticipate the nature and scale of its consequences for lives and livelihoods.
“But it’s already clear that the businesses we cover will have a key part to play in mitigating Covid-19’s worst effects.”
Ms Wayman said the Fos was working closely with the FCA to minimise the pressure on businesses while remaining committed to resolving any complaints that arise.
The way the ombudsman service is funded has been a controversial topic since it proposed significantly increasing the proportion of the income it got from its industry levy, predicting a shrinking service in light of the payment protection insurance deadline last August.
Pimfa had slammed the proposed changes, branding the suggested shake up "unreasonable, unfair and disproportionate" while the Building Societies Association heavily criticised the plans, claiming they would penalise firms which attract fewer complaints.
The proposed changes also came against a backdrop of rising professional indemnity insurance and compensation scheme levy costs for advisers.
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