The Financial Ombudsman Service is an independent public body set up by Parliament to sort out complaints between financial businesses and their customers in a fair and impartial way. The way we’re governed and funded reflects our independent role.
How we’re governed
The "scheme operator"
The "body corporate" that administers the ombudsman scheme as the "scheme operator" (under s225 of the Financial Services and Markets Act) is a company “limited by guarantee and not having share capital”. This company is called the Financial Ombudsman Service Limited.
As the industry regulator, the Financial Conduct Authority (FCA) publishes the rules that set out how we – and financial businesses – should handle complaints in the FCA Handbook in the section called Dispute Resolution: complaints (DISP)
The FCA also appoints our board of directors, and appoints our chairman with the approval of HM Treasury.
Our board members are “non-executive”, which means they don’t get involved with considering individual complaints. Their role is to oversee the strategy of our service and to make sure we have the resources we need to work effectively and independently. The board also:
- appoints our panel of ombudsmen, who are responsible for considering individual complaints
- approves our annual report and accounts, which looks at the performance of our service over the last year
- publishes the minutes of its board meetings
- forms the audit, nomination and remuneration subcommittees
Although we work closely with the FCA, we operate independently.
To make sure we’re fully accountable, every year we:
- run a public consultation on our proposed plan and budget for the year ahead
- publish our annual plan and budget online
- submit our annual report and accounts to Parliament
- are audited by the National Audit Office
How we’re funded
At the time we were set up, Parliament decided that:
- access to a free, independent dispute resolution service was essential for public confidence in financial services
- businesses, not their customers, should meet the costs of resolving complaints
Our service continues to be free for the consumers and small businesses which use us.
All financial businesses that are covered by our service and are regulated by the FCA pay an annual levy to contribute to our costs. Businesses may also have to pay an individual case fee when we handle a complaint about them.
The way we resolve complaints makes no difference to the funding we receive. This helps to make sure our decisions are impartial.
Levy on financial businesses
Every year the FCA collects a levy from all businesses that are covered by our service and are currently regulated by the FCA. These businesses must pay the levy whether or not we’ve received any complaints about them.
The FCA bases the cost of the levy on the volume of cases we expect to receive. The levy ranges from around £45 a year for a small financial advice business to over £1 million for a high-street bank. Businesses can use the FCA’s fee calculator to see how much the levy will be.
Our service also collects an annual levy from businesses that aren’t regulated by the FCA but have chosen to be covered by our voluntary jurisdiction.
A fee applies every time one of our case handlers investigates a case. Businesses are entitled to free chargeable cases a year subject to what is agreed in our consultation.
Read more about when a case fee is payable and how much it costs.
The powers and functions of the scheme operator are set out in the company’s legal constitution:
- articles of association, and;
- memorandum of understanding