PIMFA criticises new 50:50 funding proposal from FOS

Trade association for investment managers and financial advisers PIMFA has criticised the latest 50:50 funding proposal from the Financial Ombudsman Service’s (FOS) Our Future Funding consultation.

The funding proposal from the FOS suggested splitting the costs 50:50 between case fees and the levy, the later cost being borne by all firms.

As a result of the newly proposed structure, those firms which generate fewer complaints will subsidise those accounting for the majority of complaints to the ombudsman, PIMFA said.

The trade association has heavily criticised the proposed split, highlighting it is unfair and disproportionate.

PIMFA director of regulation Ian Cornwall said: “We strongly disagree that FOS’s levy and case fee income should be rebalanced to 50:50 split. No financial analysis was provided in the consultation paper explaining how this decision was reached.

“The new proposal is unreasonable and will penalise firms with a low level of complaints and provides little incentive for firms receiving a high volume of complaints to modify their behaviour and/or improve their complaint handling.”

Currently, 85 per cent of funds are from fees paid by firms for each complain that is raised and 15 per cent from a levy.

Cornwall argued that the ombudsman should “rework its proposal” to ensure that the costs recovered by means of a levy are as low as possible.

“Further work is needed to address this issue,” he concluded.

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