FOS to freeze case fees despite soaring budget

The increase could see the FOS budget soar to £116m as the flood of payment protection insurance (PPI) cases continues to swell.

FOS says it expects the number of cases for the year to March 2011 to be 7% higher than last year, but within this total figure, PPI cases have risen by almost 40%.

Consumers and firms are also fighting harder to win their cases in the face of tight economic conditions, increasing the number of decisions which reach an ombudsman and therefore upping costs, it says.

The proportion of cases requiring an ombudsman's decision has risen
from around 8% in 2008/9 to a current rate above 14%.

However case fees charged to firms will be frozen at £500 for the second consecutive year. The FOS receives 80% of its budget through these fees.

Meanwhile, the FOS's annual general levy, to be split between all FSA-authorised firms, will remain at £17.7m.

"Aside from our rapidly-growing PPI caseload, complaints involving banking and credit (including mortgage-related complaints) continue as our largest area of work.

The number of cases relating to investments continues to decline, compared both with the numbers for last year and with this year's forecast

However several specific "new" investment issues have emerged, it says, including complaints from consumers who assumed property was a "safe" investment and were unhappy to find they could not access capital when withdrawals from property funds were deferred.

It says it has have also seen a "significant" number of investment complaints from consumers who found they had invested in products which carried greater levels of risk than they had anticipated.

"We have seen some instances of highly unsuitable products being sold to elderly and inexperienced investors. We are talking individually with businesses - and, where appropriate, with the regulator - where this appears to have happened," it says.