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AMI hits out at FOS compensation limit increase

  • 25/10/2018
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AMI hits out at FOS compensation limit increase
The Association of Mortgage Intermediaries (AMI) has hit out at plans to significantly extend the remit and compensation limits of the Financial Ombudsman Service (FOS).


AMI said it “strongly opposes” the significant increase to fee limits and added it was deeply concerned about the plans to include larger businesses under the FOS.

The Financial Conduct Authority (FCA) published proposals which will see the FOS more than double its maximum payout from its current limit of £150,000 to £350,000.

Larger small and medium enterprises (SMEs) would also become covered under the FOS for the first time, according to last week’s consultation.

Compensation would also be increased in line with inflation from April 2020, with any complaints referred to the ombudsman before April 2019 subject to the limit of £150,000.

FOS was set up with a £100,000 limit which was raised to £150,000 in 2012 in line with inflation.

A statement from AMI said: “By more than doubling the compensation limit the FCA has lost sight of both its own and FOS’s purpose.

“Its purpose was to cater for cases that could be dealt with speedily and by using dispute resolution techniques to gain agreement.

“Cases above these levels were deemed to be more appropriate for legal decisioning in courts based on contract law.”


Inappropriate process

AMI chief executive Robert Sinclair said that accessing dispute resolution for significant cases on a fair and reasonable basis rather than a proper legal dispute procedure through the courts was inappropriate.

“Just because there are examples of higher claims being paid out does not warrant a radical increase to the FOS limit,” he said.

Even most of the respondents who agreed to the extension of FOS eligibility to include larger SMEs did not support an increase to the limit, with only three suggesting that it should be that high.

“Relying purely on data analysis is not a sufficient justification. It was always considered that higher value disputes with complex arguments should be the subject of legal remedy rather than FOS,” he added.

Regarding extending FOS coverage to include larger firms, Sinclair suggested it was a fait accompli with the FCA skewing its analysis of previous consultation responses.

“It has never been intended that those acting for business or professional reasons are afforded the same protections as consumers,” he said.

“However we are moving to a world where the regulator considers every area of ‘harm’ as their responsibility and that it is easier to simply widen its scope rather than address the issue directly.”



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