The Financial Ombudsman Service (FOS) is to further consult on changes to its funding formula next month, but has ruled out charging claims management companies (CMCs) and other professional representatives or charging businesses for delays due to non-compliance.
It will be considering changing and simplifying the compulsory jurisdiction (CJ) and voluntary jurisdiction (VJ) levies, a time-limit for challenging fees, and how the largest financial services providers are charged.
The FOS revealed the industry generally supported a ‘polluter pays’ model to incentivise reducing complaints and believed it should have a differentiated fee model with various suggestions posed.
It added there were “strong” feelings about charging professional representatives and the need for more transparency around the ombudsman’s funding model.
The feedback came following the regulator’s June discussion paper published as part of its 2022/23 Plans and Budget consultation, where respondents were asked about the ombudsman’s funding model which has been unchanged since it was set up in 2000.
The June 2022 Discussion Paper put forward the following options for discussion:
- Retaining one flat case fee for simplicity
- Changing and simplifying FOS’s compulsory jurisdiction (CJ) and voluntary jurisdiction (VJ) levies
- Differentiating case fees by product and/or stage
- Making an element of case fees payable upfront
- Changing group fee account arrangements for the eight largest financial business groups
- Additional changes around data publication and case fee disputes
Consultation plans
Publishing the feedback statement, the ombudsman revealed that its 2023/24 Plans and Budget consultation will feature the following proposals:
- Changing FOS’ CJ levy and VJ levy to recover fixed costs – those costs that do not materially change with volume
- Introducing a 12-month time limit for disputing case fees
- Trialling changes to the group fee account arrangements
FOS added it will continue to assess and improve its processes to enable differential case fees with a view to consulting in its 2024/25 Plans and Budget consultation on the following proposals:
- Differential case fees by case stage and/or by product type – this will be based on modelling undertaken over the next 12 months
- Charging an initial case fee at conversion
However, the FOS added it will not move forward at all with the following options:
- Pursuing legislative changes to enable it to charge professional representatives
- Charging businesses for delays due to non-compliance
- Discounts for bulk closures
- Charging case fees based on case complexity
Not revisiting rejected plans
The ombudsman also revealed it will also not be taking forward proposals that were already discounted in the discussion paper, such as charging more for upholds or by the size of the business.
Looking ahead, FOS added its next plan and budget consultation next month will provide detailed information about the proposals it is taking forward next year and will ask stakeholders to respond on the specific plans during the consultation period, to ensure FOS has a broad understanding of views on the proposed changes.
Once the consultation closes, it will consider the feedback we have received and ask the Financial Conduct Authority (FCA) and the FOS board to approve a final budget for 2023/2024 by 31 March 2023.
Oaklin Consulting undertook an independent review of the FOS in 2021 and concluded the time was right for a more detailed review of its funding model.
