In a move designed to (in their own words) ‘ensure more complainants receive fair compensation’ and to ‘build consumer trust in the integrity of the industry’, on 16 October 2018 the FCA published a Consultation Paper in which the regulator outlines proposals for increasing the Financial Ombudsman Service money award limit from £150,000 to £350,000 for upheld consumer complaints.
Readers may recall that the last increase in FOS limits was in 2012 when the limit on money awards went up from £100,000 to £150,000.
If the proposals go ahead, the new £350,000 FOS money award limit will apply if the complaint in question was referred to the FOS, and the act or omission being complained about happened, on/after 1 April 2019.
A copy of the Consultation Paper can be found on the FCA website and comments are invited before 21 December 2018.
But no doubt many in the industry will want to feedback to the FCA about the massive leap in compensation that the FOS might be able to award, whether this jurisdictional creep is justified (or needed) and the potential knock off effect on already high professional indemnity insurance premiums been paid by some firms. Do contact one of our team if you need any assistance with this.
At the same time, and in somewhat of a double whammy for the industry, the FCA has also confirmed its earlier plans to extend access to the FOS to more SMEs. This followed on from consultation earlier this year.
The changes, expected to come into force on 1 April 2019, will mean that SMEs with an annual turnover below £6.5 million and fewer than 50 employees, or an annual balance sheet below £5 million, will now be able to refer complaints to the FOS. Currently businesses with less than 10 employees and annual turnover or annual balance sheet of less that €2million, can refer complaints to the FOS.
The FCA estimates that the new rules will mean that around 210,000 additional UK SMEs will be eligible to complain to the FOS.