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FOS sets £191m budget and confirms extra £350 PPI case fee

The Financial Ombudsman Service has set a total budget of £191.1m for 2012/13, and introduced a £350 supplementary case fee for payment protection insurance misselling complaints.

The standard case fee for next year has been frozen for the third year at £500. Firms are charged the case fee for the fourth and any subsequent complaint during the year.

The FOS is also currently consulting on plans announced in January to increase the number of free cases firms are allowed before having to pay a case fee from three to 25 a year.

If agreed, the new structure would be introduced from April 2013.The FOS is funded predominantly by case fees, and is topped up by industry levies.

It has published its approved budget for 2012/13 this morning, following a consultation paper in January.

A £350 supplementary case fee for PPI complaints will be payable when the FOS formally takes on a case, and will be charged where businesses have more than 25 PPI complaints a year.

The FOS forecasts that out of the 260,000 cases it expects to resolve during the year, half will relate to PPI.

Firms who would have to pay the supplementary case fee argued it did not take into account different uphold rates for different businesses, and that the combined case fee of £850 could encourage inappropriate behaviour by claims management firms.

However the FOS argued managing the unprecedented number of PPI cases involved “significant upfront costs”, including recruiting and training large numbers of staff to manage the complaints.
The supplementary case fee will be introduced on April 1.

The FOS says it accepts that PPI case volumes may change after 2012/13, so will review the need for a supplementary PPI case fee next year.

FOS chief executive Natalie Ceeney, says: “We need to ensure we have the flexibility and resource to deal with unprecedented volatility in complaints volumes.

“Over the past few months we have been seeking the views of stakeholders about the challenges ahead. This has helped us review our plans for the future – and decide where we need to spend our time and money in developing and strengthening our service.”

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