The Association of IFAs and the Association of Mortgage Intermediaries are at odds over their favoured options for the future funding of the Financial Ombudsman Service.
Last week Aifa reiterated its support for option H of the Fos’s discussion paper on future funding, which would see case fees becoming payable from the 11th and subsequent cases and an annual fee of around £230 per firm.
But yesterday Ami said it favours option F, whereby case fees would become payable on the sixth and subsequent cases with an annual fee per firm of around £175.
Chris Cummings, director general of Aifa and Ami, says the differing approaches result from the fact the organisations’ research and the Fos’s annual report suggest there are fewer complaints in the mortgage industry.
“It comes down to the scope of IFAs. They advise on a range of products, from pensions to investments, whereas mortgage intermediaries focus on mortgages and there is less prospect of complaints,” says Cummings.
He adds that both organisations agree the Fos’s funding model needs to change, and the differences merely come down to whether members receive five or 10 free cases.
Although he is director general of both trade bodies, Cummings does not think he is sending out confused messages and says it would be more surprising if the organisations agreed on everything.
In his response to the Fos as director general of Aifa, Cummings states: “We believe that option H best addresses the concerns of both small and large firms. With four out of five IFA cases not being upheld, this option significantly reduces the risk of small firms having to pay case fees for complaints made against them.”
Meanwhile, in his dual role as director general of Ami, Cummings says option F best addresses the concerns of both small and large mortgage intermediary firms.
He states: “At present mortgage intermediaries receive a relatively low level of complaints but there is concern that this could rise in the future. Option F significantly reduces the risk of small firms having to pay case fees for complaints made against them.”
Ami recently conducted research into the number of complaints members had received and their thoughts on whether complaints might rise in the future. The research revealed:
- 77% of firms had received no complaints since ‘mortgage day’; 12% had received one to two; 4% had received three to five; 1% had received six to nine; and 6% had received 10 or more;
- The majority of complaints received were never referred to the Fos but 34% did have one to two cases referred, 4% had three to five, and 4% had six to nine;
- 34% of firms had seen the number of complaints they had received increase since mortgage day; and
- 78% of firms believed the number of complaints made against mortgage intermediary firms would continue to rise in the future.
As Aifa and Ami director general, Cummings believes consideration should be given to a ‘complainant fee’ and a ‘pre-funding approach’, which would see firms pay at the time when a complaint is received by the Fos instead of at the time of the completion of the complaints procedure.
He suggests the extra ‘working capital’ could be costed out to examine the impact on lowering case fees, while the complainant fee - which could either be a deposit or a small sum - would help to deter the ‘have a go’ culture which has developed in the industry.
Cummings adds: “The current system has encouraged the growth in complaint management firms at a significant cost to our members. We believe that the consumer right to complain is inviolate but so is a firm’s right to expect a level playing field between complainant and defendant.”
Aifa and Ami are also proposing the Fos considers establishing a small firms division with experience of the IFA and mortgage intermediary sectors and an understanding of the way in which these firms operate.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].
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