The Financial Conduct Authority (“FCA”) has published a policy statement detailing that the Financial Ombudsman Service (“FOS”) compensation limit of £150,000 will increase to £350,000 from 1 April 2019. This follows a Consultation on the topic of the FOS award limit, which was open between October and December 2018.
The new limit of £350,000 applies to complaints about actions or omissions of firms, which took place after 1 April 2019. For complaints about actions/omissions occurring prior to 1 April, but referred to the FOS after that date, there is a smaller increase in the limit to £160,000. The policy statement further confirms that the financial awards limit will now automatically adjust annually in line with inflation.
Finally, the FCA has also announced that recourse to the FOS will now be available to larger small and medium-sized enterprises (“SMEs”) as well as individual consumers. To qualify, the SME must have an annual turnover of under £6.5 million, an annual balance sheet total of under £5 million, or fewer than 50 employees. This extension has been introduced by the FCA in recognition of the cost and time difficulties faced by consumers and SMEs when considering taking firms to Court. In particular, Andrew Bailey, Chief Executive of the FCA, stated that “…it is essential [that consumers and SMEs] can receive fair compensation from the Financial Ombudsman Service when things go wrong”.
These changes could significantly increase the value and number of financial awards made as a result of complaints to the FOS. Firms should also note that the implementation period for these new rules is relatively short.