Collegiate News

FSA to consult on raising £100k compensation cap

14 July 2005


Money Marketing -14-Jul-2005


The FSA is to consult on controversial proposals to increase the amount of compensation that the Financial Ombudsman Service can award complainants.


The proposals to raise the £100,000 cap, made by independent assessor Michael Barnes in the ombudsman'...

The FSA is to consult on controversial proposals to increase the amount of compensation that the Financial Ombudsman Service can award complainants.


The proposals to raise the £100,000 cap, made by independent assessor Michael Barnes in the ombudsman's annual report last month, have prompted fears of rising PI costs and increased IFA vulnerability.


The FOS can currently recommend that additional compensation be paid although firms do not have to accept the recommendation.


Barnes stated in the report that complainants who are not prepared to settle for £100,000 and are unwilling to gamble son whether the IFA will accept the FOS's recommendation for extra compensation could be forced to pursue costly legal action against the firm.  He argued that the cap had been in place since 1981 and should be raised substantially.


But Collegiate managing director Tony Howe says PI insurers could refuse to provide cover above £100,000.

He says: "The FOS needs the support of the PI market. There is no point demanding more compensation from an IFA that cannot get insurance. This will only push IFAs out of the market and shift the costs on to the Financial Services Compensation Scheme."


Positive Solutions IFA John Donaldson says: "This will add to the general concern among advisers about the spurious claims that are leading to the bankruptcy of IFAs."



FOS spokesman David Cresswell says: "It would be misleading to focus on this issue because only 0.3 per cent of awards exceed £100,000. I am not surprised PI insurers are resistant to these proposals as it is their intention and purpose not to pay claims and tell cli- ents how to reject complaints."


Regulator is right not to increase ombudsman limit

23 June 2007


Money Marketing-21-Jun-2007

Martin Archer, Claims Director, Collegiate Claims

Having been closely involved with two of the cases referred to in Adam Samuels' article headlined, Power Failure at FOS, (Money Marketing, June 14), I do take issue with the main thrust of the article, namely that the FSA looks foolish in declining to raise the ombudsman's jurisdiction limit.

In my opinion, the FSA looks nothing of the sort. The Financial Ombudsman Service is wholly unsuitable for resolving big loss cases. 


We can all recognise that the FOS has a role in resolving disputes but its procedures are based on the desire to minimise costs and promote access to justice.


However, while one can live with the "rough and ready" results that this will understandably deliver for small-value claims, the limitations of the service need to be recognised.


In particular, the reluctance to hold oral hearings and the inability to summons witnesses make it a completely unsatisfactory jurisdiction to resolve high-value claims.


It would be grossly unfair to compel an IFA and their insurers to pay more than £100,000 where the client's version of events is disputed without the client being subject to oral cross-examination.


It is simply not the case that FSA consumer protection is inadequate for those with big losses. Consumers have access to arguably the best legal system in the world which has been developed over many centuries to deliver true justice in a case.


The advent of no-win no-fee solicitors backed with legal cost insurance make it perfectly possible for consumers with valid complaints to pursue them through the courts.


It is not treating your customers unfairly to raise legitimate defences to claims and the FOS is not the final arbiter of that on claims over £100,000.


The FSA recognised the limitations of the FOS procedures that are inherent in any cheap and cheerful delivery system and were absolutely correct in resisting the pressure to increase the limit.


An increase to the limit would undoubtedly have advantages to consumers but the burden of unjust decisions falls too heavily on individual IFAs.