Britain's Financial Ombudsman service is planning to revise its income-gathering regime to make the financial firms that attract few or no complaints subsidise the less reputable ones, according to commentators.

The FOS is planning to split the costs 50/50 between case fees and the 'all firms' levy, i.e. the levy paid by all firms. The result of the new structure will be that firms which generate fewer complaints, will greatly subsidise firms which account for the majority of complaints to the ombudsman.

The FOS is paid for by levies and case fees (collected by the Financial Conduct Authority) which the businesses that it covers have to pay by law. At the time that the Government set it up, Parliament decided that it should not charge consumers for presenting it with their complaints. The largest banking groups pay an additional fee. A case fee for the 26th (and any subsequent) “chargeable” case is £550. It becomes chargeable when passed to the FOS adjudicators. At the moment, the 'polluters' contribute 85% of FOS funding and the general levy contributes 15%.

This is due to change, with plans for a new funding structure that relies far less on the number of complaints that this-or-that fee-paying firm attracts. Commentators have described the proposals as perverse. The FOS, for its part, hopes that the reforms will make its funding more stable.

Ian Cornwall of PIMFA, the wealth management trade association, told Compliance Matters: "The result of the new structure will be that firms which generate fewer complaints will greatly subsidise firms which account for the majority of complaints to the ombudsman. It is unfair and disproportionate. We strongly disagree that FOS’s levy and case fee income should be rebalanced to a 50/50 split. No financial analysis was provided in the consultation paper explaining how this decision was reached. The new proposal provides little incentive for firms receiving a high volume of complaints to modify their behaviour and/or improve their complaint handling. FOS should rework its proposal so that the costs recovered by means of a levy are as low as possible.”