The FSA has confirmed its intention to increase the Financial Ombudsman Service’s jurisdictional award limit from £100,000 to £150,000. The FSA first formally announced its proposal in its consultation paper of September 2010, and sought feedback on it from the industry as part of its normal consultation obligations. The FSA has said that the vast majority of respondents, including FSA-regulated firms and trade associations, agreed with the increase. As such, in its further consultation paper dated 27 May 2011, the FSA confirmed that the FOS will be able to make awards of up to £150,000.
The FSA claim they want to ensure the protection offered to consumers has not declined in real terms. The FOS’ jurisdictional limit was set in 2001 and the FSA has confirmed that the FOS’ award limit will be periodically reviewed (although another review is unlikely in the short term).
The new jurisdictional limit will apply to all complaints referred to the FOS on or after 1 January 2012. As such, FSA regulated firms may like to consider issuing any outstanding Final Decision Letters by the end of June, to ensure that the 6 month window for complaints to be referred to the FOS ends before the new limit takes effect.
It is also important to bear in mind that, as a result of a court ruling in November 2010, a complainant who accepts a final decision from the FOS is bound by it and will not subsequently be able to bring a civil claim to recover any losses above the FOS’ jurisdictional limit. As such, if a complainant does accept a final decision made by the FOS (in relation to a complaint made to the FOS on or after 1 January 2012) the most a firm will be liable to pay is £150,000 plus interest. For more information on this case, please click here
The FSA has announced the increased award limit alongside other changes to their complaints handling rules. The other changes include firms being required to identify a senior individual responsible for complaints handling. The responsible individual does not need to be involved in the day-to-day management of complaints handling but they are responsible for oversight of the firm’s compliance with the FSA dispute rules. Firms must be able to tell the FSA or FOS the name of the senior individual on request. Although most firms already have such an individual, those who do not must comply with this requirement by 1 September 2011.
Another important change is in relation to firms’ obligations to undertake root cause analysis where complaints identify recurring or systemic problems. The extended guidance due to come into force on 1 September 2011 very much reflects the recent specific PPI complaint-handling guidance requiring firms to consider the position of non-complainants where such problems are identified. This is only likely to increase the potential financial exposure for firms arising from complaints that they receive.