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FOS proposes £90m budget increase and case fee hike

by Michelle Abrego on Jan 10, 2013 at 08:46

FOS proposes £90m budget increase and case fee hike

The Financial Ombudsman Service (FOS) has proposed raising its budget by nearly £90 million from £191 million in 2012 to £280 million for 2013 due to the volume of payment protection insurance (PPI) cases it expects.

In its proposed budget for 2013/14, the FOS said that it expected the amount of PPI work to double this year and has suggested raising its income budget by £89 million from the one for 2012/13.

It has also proposed to raise the standard case fees for individual firms from £500 to £550 and upping the total amount it levies firms from £17.7 million to £23 million.

The FOS, headed by chief executive Natalie Ceeney (pictured), said that it ended the current financial year with a ‘significant deficit’ but hopes to break even by the end of the 2013/14 year.

Under its existing funding arrangements, the Ombudsman said it was not certain as to when it will actually receive its income, which comes from standard case fees that are paid only once a case is finally settled.

Under its reserves policy, it needs to maintain financial reserves equivalent to three months’ operating cost, which is currently £25 million but which it claimed needs to be raised to £75 million.

The FOS has also decided to proceed with the new ‘group-account fee’ for the UK’s largest banking groups, after consulting on it in 2012. The fee would be determined in advance on the basis of an overall proportion of expected work from each. This would then apply to the four banking groups that together account for around 60% of the FOS’s caseload, it said.

This would also mean that t majority of smaller businesses would no longer pay any case fees at all as the number of free cases for each business would go up from three to 25, it said.

The FOS said that its last budget was based on the assumption that it would receive 120,000 new cases other than PPI, and 165,000 new PPI cases. However, by the end of November 2012 it had received 54% more cases than it had forecasted.

The number of cases relating to investments, including pensions and mortgage endowments, increased by 31% compared with 2011/2012.

12 comments so far. Why not have your say?

Greg M

Jan 10, 2013 at 09:06

If they charge £550 per case, surley the 'increased volume of PPI claims' should be self funding and providing a nice windfall in income?

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John Smyth 3

Jan 10, 2013 at 09:09

Just like politicians once these Quangos are created the types that head them always grow and grow their empires. This time they are proposing to do it when austerity for everyone else is the buzz word.

If McCarthy, Turner and Sants had done their jobs and regulated the banks and insurance companies properly there would not be any or very few PPI claims. Why then are they or were they given public honours?

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Anitaki

Jan 10, 2013 at 09:13

This operates just as any malignancy eventually kills its host.

I bet they are already working out massive redundancy payouts for themselves for when all the IFAs are gone. In about 3 years at this rate.

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Bob Donaldson

Jan 10, 2013 at 09:46

Possible reduced incomes this year, increase in fees and increases in the cost of PI cover let alone the increased costs of running a business with all this red tape and regulation. The word austerity does not even enter the vocabulary of these people. They will only be happy when they have killed us all off!

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David M via mobile

Jan 10, 2013 at 10:25

The fee for PPI had already increased during 2012 to £850.

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Polfers

Jan 10, 2013 at 11:59

Put Alan Sugar or similar in charge with a remit to get back to reality. Why are we funding ambulance chasers, fat cats and Quango's with no moral compass?

I wonder who will be able to claim compensation from whom once everone is doing everything on DIY Execution Only Websites? Maybe Marin Lewis will be left holding the baby "well, your webste told us to do X!.

And, on the brink of their own extinction, FOS, FSCS and the regulators can invest their (as previoudsly referred to), large golden goodbye monies into thier own investments and disapear up their own posteriors.

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Should Know Better

Jan 10, 2013 at 12:49

Sorry but why doesFOS need to get involved, aren't the PPI sellers paying out to all..........

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What a load of tosh

Jan 10, 2013 at 13:01

The savings made by the average small firm by having 25 free cases will be wiped out many times over by the announcement that they are increasing the standard levy by 30%. Check your next FSA fee invoice to see how much more FOS is really costing us.

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EURYN OWEN

Jan 10, 2013 at 16:05

Give the cat another canary!

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Mike Morley

Jan 10, 2013 at 16:24

"Shurely shome mishtake!" In our brave new world the commission hungry policy floggers have been banished to Mordor or beyond. The FOS now has no place in the world of RDR as all firms will be giving absolutely pukka advice on a fee only basis so no claims - simples!

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Richard Hardy

Jan 11, 2013 at 09:30

"Under its reserves policy, it needs to maintain financial reserves equivalent to three months’ operating cost, which is currently £25 million but which it claimed needs to be raised to £75 million".

Have I misread this article but how on earth does it cost £25 million a month to run the FOS?

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Julian Stevens

Jan 11, 2013 at 09:33

Not that we ever receive any complaints (touch wood) but, if we did, as members of a network, we'd get no free cases because, in the eyes of the FOS, we're not considered to be an independent trading entity. This seems to be patently inequitable.

Also, from which quarter are all these extra cases emanating? Almost certainly, virtually all the PPI ones are from the banks and building societies. If, as the data suggests, the majority of the rest are coming from similar sources, then why should IFA's be required to pay higher FOS levies? It's not our activities that are contributing to the FOS's additional workload. Shouldn't the total FOS bill be apportioned according to the numbers of referred cases generated by each particular sector, so that the banks would pay more and IFA's would pay less?

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