In two recent publications, the FCA has proposed an expansion of the Financial Ombudsman Service's (FOS) jurisdiction and financial limit. This column considers whether the FOS is likely to be able to adequately deal with more complex matters, and if the expansion provides a good reason for an overhaul of the statutory scheme.
FCA policy statement 18/21: SME access to the FOS
The FCA published a policy statement (PS18/21) on 16 October 2018, which sets out the regulator's "near-final" rules in relation to the expansion of the FOS jurisdiction to cover small and medium-sized enterprises (SMEs).
The definition of "complainant" in the FCA's Dispute Resolution: Complaints sourcebook (DISP) is expanding to include firms with turnover of less than £6.5 million and under 50 employees and balance sheet of £5m – quite substantial size, I would say.
The FCA confirmed a proposal to expand FOS's financial limit from £150,000 to £350,000 – and it seems likely that it will also be finalised during the course of 2019. The £350k limit is binding on the firms, but of course the FOS can recommend greater amounts to be paid out – and often does. These cases then often end up in the Courts and put the regulated firms under the FCA microscope (TCF etc)
Consequences of FOS expansion
The result is that FOS will now be able to determine complaints where huge amounts of money are at stake. This will inevitably throw up complex legal questions - far more so than the current situation.
In light of the above, it is almost certain that we will see more cases challenged in the High Court. IFAC can help here, and for an astonishing £154 fee payable to the high Court, a decision can be challenged. https://www.gov.uk/government/publications/form-n461-judicial-review-claim-form-administrative-court
But the flip side is that slightly larger businesses and trusts now will be able to bring cases via FOS. And that means you too may be able to use this system.
In addition when the FCA regulated claims management companies, it is likely that most IFAs will register for this permission, enabling them to help customers with these complaints directly, and to take a cut of the subsequent compensation – which as you can see could be very large indeed.