The Financial Conduct Authority confirmed last month that the limit for compensation that can be awarded by the Financial Ombudsman Service (“FOS”) will be raised from £375,000 to £415,000, for complaints made after 1 April 2023 relating to acts or omissions on or after 1 April 2019 – an increase of over 10%.
A lower limit of £190,000 applies to any complaints made from 1 April 2023 relating to events that occurred prior to 1 April 2019 – again an increase of over 10%, from £170,000 in 2022.
This increase has been made in line with CPI inflation. Annual inflation linked increases to FOS compensation limits started in 2019 when the FCA reset the maximum compensation from £150,000 to £350,000. This coincided with FOS’s remit being widened to include not only individual consumers and micro-SMEs, but also SMEs with less than 50 employees and a turnover of under £6.5m per annum.
Whilst these increases are inflation-linked, it does mean FOS awards can have increasingly significant financial clout and impact on firms; especially considering that FOS processes are meant to be informal and reach what FOS considers is a fair and reasonable outcome, which may not always align with parties’ strict legal rights.
The increased FOS limits bring into sharp focus the need for firms to ensure their complaint handling processes are robust, to reduce so far as possible the number of meritorious complaints being referred to the FOS.