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corporate plan and 2010/11 budget

January 2010

context

In the 1980s the insurance and banking sectors set up ombudsman schemes. They recognised that access to independent redress if things went wrong would increase consumer confidence in financial services - and that consumers see the courts as costly and off-putting. The sectors volunteered to pay the cost of the ombudsman schemes, creating a free service for consumers, and established independent governance arrangements to secure the independence of the ombudsmen.

In 2000 Parliament legislated to create a comprehensive independent Financial Ombudsman Service, merging into it the insurance and banking ombudsmen, together with other financial ombudsmen that had subsequently been established. The financial services regulator - the FSA - acts as an arms-length sponsor, and the financial industry continues to meet all of the cost.

The ombudsman service resolves financial services and consumer credit cases as an informal and quicker alternative to the courts. It is not a regulator or policy-maker. Like the courts, the ombudsman service is independent of the parties in dispute, and operationally independent of government and regulators.

Its specialist expertise allows the ombudsman service to resolve disputes at a fraction of the costs incurred in court, and with no charge to the public purse. Decisions made by the ombudsman service on individual cases - coupled with the service's commitment to openness and transparency - encourage fair behaviour by financial businesses, enabling regulators to focus on major and systemic issues.

Unlike the courts, the ombudsman service engages with regulators, the financial industry and consumer bodies about the lessons learned from its work, so all can benefit. The availability of the ombudsman service - and the extensive information it makes publicly available - helps financial businesses that want to treat their customers fairly and improves consumer access to redress.

Our corporate plan and budget sets out how the ombudsman service aims to carry out the role intended for it by Parliament - in an effective, open, accessible and transparent way - in the light of the challenges that continue to face the financial sector and its customers. The budget sets out the resources and income required for the ombudsman service's work.

We have handled a record number of cases so far in our 2009/10 financial year and have reduced waiting times for our users. We aim to resolve even more cases in the 2010/11 financial year, and to work towards eliminating waiting times - while reducing our unit cost and freezing both the total levy (paid by all financial businesses) and our case fee at the levels that applied in 2009/10.

We are keen to receive input from all our stakeholders on:

  • the likely volume and mix of cases referred to the ombudsman service in 2010/11 and beyond;
  • the range of confidence and risks associated with those forecasts;
  • the overall structure of our budget; and
  • the balance between case fees and levy.

The responses to this consultation will help us to finalise the budget we put to the financial services regulator for approval in March 2010.