The Financial Ombudsman Service (FOS) should scrap or substantially raise its £100,000 redress limit, urges the All Party Parliamentary Group on Insurance and Financial Services (APPGIFS).
In its recommendations to Lord Hunt who is conducting a review of the FOS, APPGIFS says the existing limits on binding awards were established over a quarter of a century ago and have not increased in line with financial transactions carried out by retail and small business customers.
It would like to see the limit abolished altogether but accepts some ceiling would need to be imposed.
“This would need to be at a level that would prevent the overwhelming majority of complainants contemplating the courts as a viable alternative to the FOS,” it says.
The APPGIFs also says it is against introducing FOS access fees for consumers (even where such a fee is refunded where a case is upheld) as it feels this might deter some consumers with genuine grievances.
However, it does acknowledge the industry’s concerns about mischievous complaints (especially those driven by claims companies) and suggests greater transparency regarding the FOS’s filter processes used to sift out these complaints.
Other recommendations on how the FOS can be improved include better communication of the reason for individual case decisions.
This increased transparency will be key APPGIFS believes as the FSA’s principles-based regime gains momentum and firms are operating without the safe haven of detailed rules and there is less predictability.
The Parliamentary group says there is a possible role for the FOS in promoting good practice although it stresses it should not allow itself to become a “quasi-regulator”.
APPGIFS also recommends the creation of a small firms division within the FOS aimed at dealing with cases and promoting a good practice message.
The launch of a separate, independent appeals tribunal should be considered alongside better communication of the option to refer an initial decision by an adjudicator to an ombudsman.
The APPGIFS was founded in January 1991, following an initiative from Post Magazine which is published by IFAonline.co.uk’s parent Incisive Media, and has tackled a wide range of issues over the years.
The FOS was created as a single compulsory scheme in 2000 to bring together six pre-existing schemes. Soon after its formation, the FOS became engulfed in the mortgage endowment mis-selling crisis which gave it little time to consider how the new scheme should operate. As a result, it has now commissioned Lord Hunt, deputy chairman of APPGIFs, to carry out an independent review of the FOS centred on Openness and Accessibility.IFAonline
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