The Financial Ombudsman Service (FOS) is consulting on changes to its case fees depending on which stage they are resolved and potentially on the outcome, enforcing a “polluter pays” approach.
No fee levels have been suggested yet, however FOS said the proposals would better reflect the effort and cost it incurs investigating cases and could support the early resolution of complaints.
It is also proposing charging firms and professional representatives quarterly and in advance based on a forecast of case volumes.
Financial firms currently pay a fixed fee of £650 for every case against them the service investigates, regardless of the stage at which the dispute is resolved.
From 1 April 2025, if the complaint is submitted by a professional representative and not upheld by the ombudsman, this fee is reduced to £475. Most businesses receive three free cases a year.
While this current model has meant all firms pay the same, regardless of the stage the case reaches and how much work goes into resolving the dispute, some businesses have said this is unfair when they are settling complaints earlier in the process.
The consultation is seeking views on case fees being differentiated based on the stage at which a case is resolved. Complaints closed later in the process require more work and therefore cost more than those which are resolved earlier.
Polluter pays
The ombudsman is also consulting on whether case fees should be differentiated based on complaint outcome.
Previous feedback from stakeholders has called for a stronger “polluter pays” model where those firms found to have done something wrong contribute more towards the service’s costs. This option would see firms pay less if the ombudsman feels they have already resolved the dispute fairly themselves.
FOS is also seeking views on a change to the free case allowance. The introduction of charging for professional representatives now means the value of free cases can differ.
Changing the free case allowance to a monetary value would allow all respondent businesses and professional representatives to save the same amount of money.
Jenny Simmonds, interim chief executive at the Financial Ombudsman Service, said: “We are undertaking an ambitious transformation programme to reform our service and make it work for today’s economy.
“These proposals are seeking to modernise our charges for businesses, creating a fairer funding model that is fit for the future, and which better reflects our work, while ensuring our service remains free to consumers who bring their cases directly to us.”
Payment in advance
The proposals also include a move to change the ombudsman’s payment mechanism to charge the majority of businesses and professional representatives quarterly and in advance.
This would be based on a forecast of case volumes, with a mid-year check and end of year adjustment for accuracy. This would give the service the funds required to work cases while also ensuring businesses and representatives have a more predictable cash flow through the year.
In 2024/25, seven in 10 businesses whose customers referred complaints to the ombudsman did not pay any case fees at all.
For financial businesses that do pay case fees, the cost involved is likely to be much less than the legal costs of defending the case in court.
The consultation coincides with two other consultations being run by HM Treasury and by the Financial Conduct Authority and the Financial Ombudsman to look at ways to modernise the redress system.
All consultations close on 8 October.
An effective rebate
FOS charges featured prominently in a number of consultations towards the back end of last year.
In December, FOS proposed that advisers, insurers and other financial services firms be refunded £175 if a complaint taken to the ombudsman is not won by the claims management company (CMC) submitting it.
The effective rebate proposed by the FOS is expected to earn around £3m from fees charged to CMCs and other professional representatives in the 2025-26 financial year.
Change to charges
In November, the ombudsman proposed that advisers, intermediaries, insurers and other financial services firms be forced to pay fees for complaints made to the service when they are submitted.
The move would reverse the current position where respondent firms are invoiced after the case has been decided.
The change was floated following protests by the claims management industry that paying fees on submission of a complaint, as is being introduced for those firms, will be unfair.
At present the FOS charges a fee when a case handler formally investigates a complaint against a firm.
And that same month FOS revealed the introduction of a £250 case fee for complaints submitted by claims management companies (CMCs) and other professional representatives.
This coincided with the Financial Conduct Authority (FCA) consulting on stricter rules for these firms to meet when submitting complaints, including dismissing them en masse when poorly evidenced.
However the regulators rejected strong arguments from across the financial services industry to match the fee to the same level of regulated firms, which is £650 per case for the 2024-25 year.
And to soften the blow it increased the free case provision for CMCs and other professional representatives from three to 10 cases per financial year.
