Financial Ombudsman Compensation Limit Increases to £375,000

The Financial Conduct Authority (FCA) has confirmed that the Financial Ombudsman Service (FOS) compensation limit will be increased to £375,000 from 1^st April 2022.

What is the FOS?

The FOS is an independent complaints arbitration service between financial services firms and consumers or businesses.

• It is funded by levy on regulated financial firms.
• Any decision is binding on the financial services firm i.e., if the FOS awards compensation of £50,000 or £375,000, the financial firm must pay the compensation and cannot dispute it.
• Any decision is not binding on a complainant, you are free to ignore the decision and still pursue the matter through the courts.

What are the compensation limits?

For complaints made after 1 April 2022 for errors/omissions by the financial firm after 1^st April 2019, the compensation limit increases to £375,000.

• For complaints made before 1 April 2022 for errors/omissions by the financial firm after 1^st April 2019, the compensation limit remains at £350,000.

For complaints made after 1 April 2022 for errors/omissions by the financial firm before 1^st April 2019, the compensation limit increases to £170,000.

• For complaints made before 1 April 2022 for errors/omissions by the financial firm before 1^st April 2019, the compensation limit remains at £150,000.

Comment

More misery for financial services firms.  Whilst the FOS estimates that only around 150 complaints per year would need compensation at the maximum award of £375,000, the reality is that professional indemnity insurance costs will increase, and no doubt financial services firms will need to increase their fees to cover these costs.

It is a travesty that financial firms cannot appeal against an ombudsman’s decision.  No doubt there are many genuine complaints that need to be paid for but equally, there will be many complaints that are malicious, over inflated, or indeed false.

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