Financial Services Act overhauls fee structure for FOS

The Financial Services and Markets Act 2023 (FSMA 2023) introduces changes to the Financial Ombudsman Service (FOS), specifically to the charging of fees. Section 63 of FSMA 2023 amends the Financial Services and Markets Act 2000. This grants HM Treasury the authority to regulate the types of individuals or entities who will have fees imposed by the FOS.

Currently, the FOS can only charge fees to respondents in a case, normally firms facing a complaint. However, the amendment aims to extend fee-charging to include claims management companies (CMCs) and other relevant professional representatives acting on behalf of complainants. There is a tentative timeline to implement fees by the end of September 2024.

The government emphasises the importance of public participation in shaping these regulations. On 5 December, authorities made a draft of the proposed statutory instrument (SI) available. Alongside this, an explanatory policy note, encouraging stakeholders to provide feedback on its effectiveness.

The policy background clarifies that the FOS aims to facilitate the fair, timely, and informal resolution of disputes between consumers and financial service firms. Currently funded by levies and case fees from regulated firms, the FOS wants to remain a cost-free service for consumers. However, stakeholders have raised concerns that claims management companies might exploit case fees to pressure firms into premature settlements.

Matthew Maxwell Scott, executive director of ACSO, commented on the proposed regulations. He said: “CMCs play an important part in the claims industry, offering consumers choice when they need help to make a claim against financial and other institutions.

“On principle, we argue that the authorities should sponsor a system that makes it as easy as possible for consumers to make a claim, and our concern is that ultimately, these proposed fees will be passed on to consumers, making it more expensive for them to make a claim, increasing the risk that people will be off claiming at all, even if they have a justifiable case.

“At a time when the cost of living crisis is hitting consumers hard financially, another layer of cost seems regressive; charging fees is just another form of stealth tax on hard pressed consumers.”

The proposed SI aims to address these issues by allowing the FOS to charge case fees to CMCs and relevant professional representatives. This will broaden the scope while excluding charities to maintain free access for consumers. The government recognises the need to balance the FOS’s financial sustainability with the goal of providing accessible and impartial dispute resolution services.

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Emma Cockings Emma is a content editor for Claims Media. Emma is a experienced writer with a background in client-centric personal injury for a major firm. She has attended and reported on multiple brokerage events throughout her career.