Financial Ombudsman Service Compensation Limit Increases

The independent financial services arbitrator, the Financial Ombudsman Service (FOS) deals with complaints where agreement cannot be reached between financial services firms and individual clients or business clients.

The service is free to consumers and is paid for by levy on regulated financial services firms.  The key driver is that consumers are not bound by an ombudsman decision and can still take matters to the courts but financial services firms are legally bound to comply with ombudsman decisions and compensation awards.  We have no choice.  If a financial firm is ordered to pay compensation, it must do so.

Increase in FOS Compensation Limit

• Compensation limits for errors, omissions or negligence by a financial firm before 1 April 2019 has been increased from £190,000 to £195,000.
• Compensation limits for errors, omissions or negligence by a financial firm after 1 April 2019 has been increased from £415,000 to £430,000.

Comment

This, yet again, leaves financial services firm wide open to compensation claims, if ruled against them by the FOS, to pay up to £430,000 with no ability to fight the award in a court of law.  This knocks on to professional indemnity insurance with premiums likely to rise for firms which in turn will mean fees charged by financial advisers to clients also increasing.

There has to be some point where ‘enough is enough’.  Consumers are well protected with rights, compensation levels and no costs to complain but financial advisers have no recourse, in particular when a vexatious claim is made, taking a year to two years to get an FOS ruling and then be quashed by the FOS.  Insurance premiums will still have gone up, reputations may be damaged and the time and stress of dealing with the complaint taking its toll with no recourse whatsoever.