Given the Financial Ombudsman Service's (FOS) desire to see larger caseload contributors paying a greater share of the costs, do you think this heralds a focus on smaller companies well being from regulators?
Kathy Cowan, Kerr Henderson
From a smaller firm's perspective, it is hard not to raise an eyebrow regarding expressions of good intent from FOS. However, in its proposal to raise the number of ‘free' cases from three to 25, the FOS' paper is at least upfront in recognising the obvious inequities of the current funding model.
In addition, the FOS follows the evidence that the one-size-fits-all approach to the levy (which distinguishes neither between the size of firms nor volume of complaints, thereby placing a disproportionate burden on smaller firms with fewer complaints) has to change.
In Charging For Our Work, I feel the that FOS has to be given credit for moving in the right direction, and listening to the many who have called for it to place more weight on the case-fee element of the overall charging structure, as well as recognising the particular needs and issues of smaller businesses.
But it would be a mistake to see this move as inaugurating a new era of regulators going soft on smaller firms. The consultation on FOS' budget and fees also notes that more complex cases - often investment ones - take longer to resolve.
Add to that, for example, the FOS' recent posting of an upheld Arch Cru complaint adjudication on its website and it is hard to escape the conclusion that the financial burden on those firms which (in its view) are more culpable could be crippling - a burden deriving not from case fees, but from such complaints being upheld and firms paying out.
Steve White, Biba
‘No' is our simple answer, and here is why.
The current FOS funding model has been in place since 2000, at a time when the FOS caseload was about 30,000 cases per year. Twelve years on, that caseload is almost ten times higher. Of the current caseload, 70% is generated by ten large financial services firms.
The current caseload is made up of a significant amount of payment protection insurance (PPI) complaints - again, generated mainly by these largest firms. The FOS has been exploring ways to better apportion its costs to better align cost recovery against those firms generating cost - i.e. those firms with the most complaints.
Biba has long argued that the costs of the PPI mis-selling ‘epidemic' should be better targeted at the source of the problem - i.e. the credit market (banks and credit intermediaries) rather than spread across the insurance intermediary sector.
