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Financial Ombudsman Service: Budget Proposal December 2020

Thursday 4 January 2024

The Financial Ombudsmen Service (FOS) has released a consultation on its plan and budget for 2021/22. This consultation proposes the FOS’s fees and costings for the upcoming financial year. The final budget is yet to be announced and is subject to feedback from the consultation.

Key Budget Proposals

There are a couple of proposals announced in the consultation that confirm the favorable fee regime for the credit union sector will continue for another year. First, the FOS intends to keep the number of free cases available to each business at the current allowance of 25 cases per year. Second, the FOS recommends that there should be a minimum levy charge freeze. This means that credit unions will continue to pay the same flat rate fee of £55 per year towards the general levy.

However, the FOS has faced an increase in the number and complexity of complaints, as a result of the COVID-19 pandemic. To account for the extra cost and instability brought on by COVID-19, the FOS are potentially looking to increase the compulsory levy and the individual case fee pricing. Whether both, either or neither of the fees are increased is under consideration. The FOS have planned four outcomes:

  1. For the levy charges to remain at £84m and case fee to remain at £650
  2. For the levy charges to increase to £106m and case fee to increase to £750
  3. For the levy charges to increase to £106m and case fee to remain at £650
  4. For the levy charges to remain at £84m and case fee to increase to £750

A general levy increase would not affect credit unions, provided that the FOS continue with the planned minimum levy freeze. A case fee increase is also unlikely to affect credit unions, apart from in the uncommon instance that a credit union needs to resolve more than 25 complaints over the year.

Consultation Feedback

The final budget is due to be confirmed in March 2021. The outcome for the budget is dependent on the feedback on the consultation. As a result, ABCUL will respond to this consultation on behalf of our member credit unions. We support the freeze in the minimum levy fee and case allowance, as both will remain at a fair level for credit unions. However, we would like to know if members have any preference on whether the levy and case fee increase or not.