A month later than planned, the FSA announced on 27 May that the proposals set out in CP 10/21 would be implemented. These included an increase in the maximum enforceable award the FOS can make under DISP 3.7.4.
In raising the award limit beyond an inflation-matching level, the FSA has given itself leeway to review the limit again periodically but without fixing a review process (inflation-linked or otherwise). The new maximum may apply to very few cases in numerical terms but they are significant for the respondent firms. In Court litigation, a case can be allocated to the ‘multi-track’ (the High Court procedure for the biggest cases) once the amount at stake exceeds £15,000. The FOS staff, not necessarily applying the law, will (from January next year) be able to decide cases ten times that size.
The FSA rejected out of hand requests for an indepedent appeal process as an alternative to judicial review. Not only would it require primary legislation but it would also likely end up replicating the judicial review process in deciding points of law or questions of jurisdiction and procedural impropriety.
In confirming that the new limit will apply to all complaints made after 1 January 2012, regardless of when the act or omission occurred, the FSA reminded firms that the £100k limit has never been a cap on liability and so firms should never have been operating under the misapprehension that their conduct could only ever cost them £100k. Where a firm identifies a liability in its own complaints handling there is no limit on the amount of redress it ought to pay.
The FSA dismissed objections based on the risk of increased PI insurance premiums. The evidence submitted by insurers and others was split between those who anticipated a possible increase in premiums and those who doubted there will be any rise. The FSA accepted evidence that premiums are set by reference to costs and not award levels and noted that the FOS limit does not stop insured firms being liable for more in any event. Intensive FSA supervision and increased emphasis on complaints handling (including root cause analysis) are likely to have a bigger impact on insurance premiums.
Firms already frustrated at the FOS operating outside the law will be more aggrieved when incurring bigger liabilities and so we can expect judicial reviews to increase – but with no more success. I wonder whether firms should instead try to take advantage of oral hearings (under DISP 3.5.5) to challenge the allegations made against them in high value cases. As the amounts at stake increase, the FOS ought to become more amenable to a more judicial process to test the evidence. Those who complain about breaches of their human rights will be pleased to note that, in deciding whether to hold an oral hearing, ”the Ombudsman will have regard to the provisions of the European Convention on Human Rights“.