FOS supplementary PPI case fee suggests inefficiencies of scale

13 January 2012

The National Audit Office's report published yesterday into the FOS' 'efficient handling of financial services complaints' challenged FOS to 'achieve efficiencies of scale' but, ...

... perhaps in acknowledgement that no such efficiencies can or will be achieved, the FOS' case fee consultation (published last week) proposes a supplementary PPI case fee of £350. 

The FOS is anticipating approximately 165,000 PPI complaints in the 2012/13 period; 60,000 more than for 2010/11.  Representing well over 1/2 of all complaints resolved, one would have thought that PPI was the obvious caseload in which to achieve efficiencies of scale.  However, to 'ensure that those not involved in the selling of PPI do not have to meet the costs that large volumes of PPI disputes are generating', the FOS proposes to set a supplementary PPI case fee of £350 in addition to the standard £500 case fee.  Nearly doubling the case fee does not suggest efficiencies of scale are imminent.

The banks against whom the majority of PPI complaints are made will be able to argue these points for themselves and, indeed, if the proposed 'group account arrangements' are introduced the fee structures will change again in any event.   One wonders, though, whether the supplementary case fee might not have something to do with deterring firms from rejecting PPI complaints.

My concern is that FOS must remain first and foremost an independent dispute resolution service, committed to the fair handling of individual cases on their specific facts and merits.  With the introduction of the publication of Ombudsman determinations as standard, it is likely that a system of precedent will form and decisions may start to be taken by cross-referencing to other, similar cases.  If FOS is to become ever more cost-focussed and process-driven, firms will understandably question the individual attention given to their particular matters. 

The financial services sector is well used by now to the idea that FOS is (at most) quasi-judicial but there will be disquiet if the 'judicial' element is seen to be diminished more and more.

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