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FOS plans to keep £122.8m PPI war chest

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  • 09/01/2014
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FOS plans to keep £122.8m PPI war chest
The Financial Ombudsman Service has confirmed it intends to keep the reserves it has built up from charging an extra £350 for PPI complaints instead of refunding fees to brokers and lenders.

In its budget plan, which opened for consultation today, the ombudsman outlined its intention to scrap the supplementary case fee of £350, payable on the twenty sixth PPI complaint it receives about a firm, because its reserves for 2013 / 2014 are forecast to reach £122.8m.

This follows its own budget statement saying it has generated more income from the fee charge than it needs to administrate the problem.

In the budget it said: “..we have considered the possibility that, if incoming cases fall faster that we are forecasting, the supplementary fee could have generated more income than we might need to spend on our PPI infrastructure for the next few years.”

FOS said it plans to keep the reserves to tackle the backlog of unresolved complaints, new complaints and the costs of eventually winding down the operation.

Over 70% of the PPI supplementary income it has received has come from Lloyds, Barclays, HSBC and RBS.

Lloyds and Barclays account for about half of the PPI supplementary income it has received which FOS said was “unsurprising” given the two banks accounted for approximately half of all the cases which it had received.

Roy Badcock, head of corporate affairs for Cambridge Building Society, welcomed the ombudsman’s proposal to stop charging the additional fee which he described as a “burden”.

He said: “We have no issue with paying a fee for an independent and fair ruling on a complaint against us but it grates with us because the third parties involved with the complaint are pushing so hard to get cases reviewed on the off chance it may be successful but in fact they very rarely stand up.”

Badcock said this was a drain on the ombudsman’s resources and a financial burden on lenders from an industry which has “got out of hand”.

He added: “Some organisations have mis-sold PPI so it is right that customers should receive redress but we are confident we have done nothing wrong but have had to pay nonetheless.”

FOS reported that 80% of its workload originated from PPI complaints and it expected the challenge of resolving the complaints to cost “hundreds of millions of pounds”.

But it added: “However we will keep an open mind on the issue and return any “excess” as soon as possible to fee payers.”

The consultation is open until 17 February and the final version of the budget will be submitted to the Financial Conduct Authority in March.

 

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