The BSA was responding to a consultation by FOS about its funding arrangements, which need to change when the window for Payment Protection Insurance (PPI) mis-selling claims closes.
The FOS has proposed a new model whereby its budget comes 50 per cent from levies and 50 per cent from individual case fees.
However, BSA claimed that under the proposed model, firms that generate fewer complaints, whether due to size or behaviour, will end up heavily subsidising firms that account for the majority of complaints.
BSA quoted an annual reduction in fees of £70m for firms with substantial complaint volumes.
“It’s perverse that the recommended funding model will benefit firms with poorer customer service at the expense of those with a far better record of fair treatment,” said Robin Fieth, BSA chief executive.
“I recognise FOS’s desire for more stable funding in a post-PPI world, however there is a fundamental mismatch between this model and the reality of FOS’s operational peaks and troughs.
“BSA is a strong supporter of FOS, which has navigated well through the troubled waters of mass claims. However, we see this proposal as a serious misstep and we urge them to drop it,” Fieth said.
The BSA proposed several alternative funding options that it said would support the FOS “without resorting to this structural change”.
These included taking the case fee upfront, rather than at complaint resolution.
The body added that sums paid by FOS to contractors could be substantially reduced when the number of PPI claims reduces.