Financial Conduct Authority consults on increasing the award for the Financial Ombudsman Service
The Financial Conduct Authority (FCA) is consulting on increasing the award limit for the Financial Ombudsman Service (FOS). The relevant Consultation Paper (CP 18/31) closes for comment on 21 December 2018.
At present, the FOS can require FCA authorised firms to pay awards of up to £150,000 to eligible complainants. It is possible for the FOS to recommend that a firm pays a larger amount, but it is not compulsory for firms to do so.
The FCA’s view is that the £150,000 award is no longer adequate, and the proposal is to increase the award to £350,000 for new complaints. Note however that the new £350,000 limit would apply to complaints about firms’ acts or omissions that happen on or after 1 April 2019.
For new complaints that relate to acts or omissions that took place prior to 1 April 2019, the proposal is to increase the current limit to £160,000. For any complaints referred to the ombudsman before 1 April 2019, the limit will remain at £150,000.
There is also a proposal that from 1 April 2020 onwards, both award limits are automatically adjusted on 1 April each year to make an adjustment for inflation.
The proposal sits alongside a policy statement with near-final rules on extending access to the FOS to a larger category of small and medium-sized enterprises.
The proposals will certainly be welcomed by eligible complainants with high value complaints as a genuine alternative to court proceedings due to the larger potential award. However, it may be disappointing to some that the larger award only relates to business taking place from 1 April 2019. That being said, it is likely that the proposals could lead to an increased number of high value (and potentially more complicated) claims coming through the FOS. One of the concerns with complaining through the FOS at present is that the process can be time-consuming, with long delays while the FOS assesses each stage of the complaint. Further, on occasion the FOS will dismiss a complicated complaint, confirming that it may be better dealt with through the courts. It is hoped that the FOS will be able to address these issues before the proposals come into existence in order to make the FOS a genuine alternative to court proceedings for high value complaints.
For more information please contact Jessica Arrol on +44 (0)20 7427 6709 or at firstname.lastname@example.org.