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financial ombudsman gears up for record 200,000 complaints - and freezes levy and case fee

12 January 2010

consultation opens on ombudsman's corporate plan and budget for 2010/11

The Financial Ombudsman Service today publishes for public consultation its proposed budget for next financial year (2010/11) - together with an update on the numbers and workload for the current financial year (2009/10).

The budget sets out how the ombudsman service plans to gear up to resolve a forecast 27% increase in the number of disputes in the 2010/11 financial year.

This will involve the ombudsman settling a record 210,000 complaints from consumers unhappy with their treatment by financial firms. This compares with the 165,000 consumer complaints that the ombudsman expects to resolve in the current financial year - itself a 44% increase on the previous year.

The further substantial increase in the volume of new cases expected to be referred to the ombudsman in 2010/11 - rising to 190,000 - takes account of initial forecasts from the financial services industry and largely reflects the continued impact of the recession.

Meanwhile, the total number of new cases brought by consumers to the ombudsman in the current financial year (2009/10) looks likely to exceed by 11% the figure of 150,000 in the budget. This reflects continued higher levels of complaints about payment-protection insurance (PPI) than originally anticipated (42,700 PPI complaints now forecast for 2009/10, compared with a figure of 25,000 in the budget).

The number of PPI complaints referred to the ombudsman service is expected to continue to rise to 46,000 cases in 2010/11. Other areas where growth in complaint numbers is expected in 2010/11 are banking (forecast to increase by 16% to 85,000 cases) and consumer credit (forecast to increase by 55% to 10,200 cases).

This continued growth in the ombudsman's workload will involve an increase in operating costs from £96.6m (forecast for 2009/10) to £113.5m (in 2010/11). This includes the cost of 300 additional casework staff needed to help resolve the expected 210,000 complaints.

The ombudsman service's unit cost - its average cost of handling a case, taking all overheads into account - is forecast at £587 for the current year (2009/10) and is expected to fall by 8% to £540 in 2010/11.

This means that the total levy to be paid by the financial services industry in 2010/11 - raising 20% of the ombudsman service's funding - can be frozen at the amount levied in 2009/10. And the case fee - paid by those financial firms that have four or more disputes referred to the ombudsman service during the year, and meeting the other 80% of the ombudsman service's funding requirement - will also be held down at the previous year's rate of £500.

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