The Financial Ombudsman Service (FOS) has recently unveiled its ambitious plans and proposals for the year 2024, setting new goals for operational efficiency, consumer engagement, and regulatory compliance. This comprehensive digest aims to provide a deep dive into the FOS's strategic vision, highlighting the key suggested changes, operational improvements, and the anticipated impact on both consumers and financial institutions.
Reduction in Fees and New Charging Structures
£650 FOS Fees: The headline change floated in the FOS's 2024 strategy is the recalibration of its fee structure, aimed at making the complaint resolution process more equitable and sustainable. Notably, the case fee for institutions is set to decrease from £750 to £650, a move designed to alleviate the financial burden on firms while maintaining the quality of service. This sits in line with the FOS’s goal that the body does not operate for a profit.
Cases Brought by Professional Representatives: In a bid to uphold the "polluter pays" principle, the FOS plans to implement charges for professional representatives, specifically targeting commercial entities that benefit economically from the complaints process. The use of external claims management companies (CMCs) or “Ambulance Chasers” has increased to the point where a company’s FOS escalation rates can sometimes no longer be a useful MI metric. James Dipple-Johnstone, Deputy Chief Ombudsman at the FOS has recently announced that CMCs make up 20% of the FOS’ case load, with over 50% of their cases being rejected. It has been seen as unjust that these firms are able to profit off the FOS as a free at the point of use service. Moreover, it is seen to undermine the perception of the FOS as an easily accessible consumer resolution body. Under a statutory instrument as part of the The Financial Services and Markets Act 2000 (The Ombudsman Scheme) Regulations 2023, the FOS has been given powers by the Treasury to charge CMCs. The expectation is for fees to kick in by September 2024.
"Our ambition is to be an easy to use, accessible service. Anyone who wants to bring a complaint to the Financial Ombudsman Service should feel confident that they can do so directly, without charge, and keep 100% of any award that we make."
Therefore come September a claimant who utilises a CMC could face a fee of £100, although there is also scope for this fee to be as high as £650 covering the full cost of the complaint. The FOS proposes that a commercial CMC would be allowed to work on 3 cases for free before this costs kicks in. This dual-fee model seeks to discourage frivolous complaints and ensure that consumers retain a more significant portion of their redress. By imposing a fee on professional representatives, the FOS intends to discourage unnecessary third-party involvement and ensure consumers have direct access to its services without financial disincentives.
Anticipated Complaint Trends and Budget Adjustments
The FOS is bracing for approximately 181,000 complaints in the 2024/25 period, with particular attention on issues like motor finance commission cases, Buy Now Pay Later (BNPL) schemes, and professional representation fees. In response to these challenges and leveraging surplus reserves, the FOS proposes a significant reduction in its compulsory jurisdiction levy from £106 million to £70 million, reflecting an efficient reallocation of resources to address the evolving needs of consumers and the financial industry.
Operational Efficiency and Enhanced Service Quality
The FOS reports a marked improvement in its operational metrics, with the time to resolve a case dropping from 4.8 months in the previous year to 3.2 months in the first half of the 2023/24 period. The organisation's vision for 2024 is focused on delivering better outcomes for consumers post-FOS involvement, emphasising the importance of resolving not just the complaints at hand but also mitigating future disputes through proactive engagement and insight sharing with financial institutions.
The FOS is focusing on “sharing insight with businesses, professional representatives and the wider regulatory ecosystem” which includes FOS “data and [their] approach to certain types of cases, as well as trends and patterns [they] are seeing”
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