According to a draft business plan and budget (51-page / 1.3MB PDF) published by the Financial Ombudsman Service (FOS), the body which deals with individual consumer complaints against financial institutions expects to handle 385,000 new cases in financial year 2013/14. Of these, a "record" 245,000 cases will likely concern mis-sold PPI.
The FOS is proposing to charge the financial services sector £23 million to reflect its anticipated caseload, up from the £17.7m levied on the industry for 2012/13.
"Two years after the court ruling confirmed the approach that financial businesses should take when handling PPI complaints, it's disappointing that we're still seeing significant numbers of unresolved disputes about mis-sold policies being referred to the ombudsman," deputy chief ombudsman Tony Boorman said. "Our proposals ensure we have the resource to tackle these record case volumes and the businesses responsible for generating the biggest workload contribute the most to sorting it out."
Complaints involving banking and credit, including mortgages, continue to make up the second largest area of work for the FOS, while the business plan also notes the increasing number of cases relating to short-term forms of credit such as so-called payday loans. The ombudsman will finalise its budget in March following a brief consultation.
PPI is intended to cover repayments due on loans or credit cards for people who cannot afford their repayments because of an accident, sickness or death. However regulators have found that these products have been "widely mis-sold" to consumers in the past; in some cases because they were not told that a policy was optional or because they were not covered by the policy they took out.
Customers who believe that they were mis-sold PPI must initially raise a complaint with the firm that sold them the policy. If the parties are unable to settle the complaint on their own, the consumer may refer the claim to the FOS for free. The service is funded by a general levy on the financial services industry, calculated in line with the estimated proportion of complaints generated by each of the different sectors, as well as individual case fees charged to those firms which generate the largest number of complaints.
From financial year 2013/14, firms will only be charged for individual complaints once they have had 25 complaints raised against them in a single year. This is a substantial increase on the previous allowance of three free cases per business. The individual case fee after this limit is breached will rise from £500 to £550.
An additional £350 fee per case for those firms that are the subject of multiple PPI complaints, introduced last April, will be retained for another year, the FOS said. This supplement is charged on every PPI complaint raised against a firm after the FOS has already dealt with 25 PPI complaints concerning that particular business.
From April, the FOS also intends to introduce a new 'group account fee' on the four largest banking groups, as together these businesses account for 60% of its costs. The new fee will be payable quarterly in advance and reflect the anticipated workload the ombudsman expects from each group. There will be an adjustment at the end of the financial year if its estimates are "markedly different" from the reality.