The Financial Ombudsman Service (FOS) is looking to update its levy structure.

In a consultation paper published today (14 June), the FOS is calling stakeholders to provide feedback on possible changes to its future funding model. That includes its levy structure as well as its case fee structure.

The call for feedback is open until 5 August.

FOS proposes that the compulsory jurisdiction levy should recover its fixed overheads rather than cover a particular proportion of its income.

Fixed overheads include IT, property and other support functions.

The FOS states: “This will bring more transparency and certainty to our funding model.

“It will also provide confidence to firms that we are effectively managing our cost base.

“As these fixed costs are to primarily cover the organisation’s infrastructure, it seems appropriate that these costs are shared by industry.”

Initial analysis by the FOS suggests that a compulsory jurisdiction levy for 2023/24 could increase above the current £106m.

The FOS expects it to reduce over time, as it refines its analysis and implement its Action Plan.

It also proposes to charge a fixed fee for all voluntary jurisdiction participants.

The Ombudsman believes it will be no more expensive than the current arrangement.

It says: “This option aims to reduce the administrative cost that stems from calculating the generally small amounts of levy for each business individually.

“This will create efficiencies for voluntary jurisdiction businesses which currently have to provide us with detailed information to inform our calculations.”

The FOS currently collects £700,000 from firms that sign‑up to its voluntary jurisdiction scheme.

This is calculated based on the size of voluntary jurisdiction participants’ business and in which industry blocks their business falls.

The Ombudsman currently has two levies: a general levy for the compulsory jurisdiction and a levy for participants who have signed up to the voluntary jurisdiction.

The general levy only applies to firms covered by the compulsory jurisdiction. The Financial Conduct Authority (FCA raises and collects it.

It is payable by all firms authorised or registered by the FCA. That also includes firms that have not had any cases referred to FOS.

The FOS collects a separate levy from businesses that have joined the voluntary jurisdiction.

The current compulsory jurisdiction and voluntary jurisdiction levies are not designed to recover specific costs.

In addition, the FOS is looking to modify its case fee structure. Several options are being considered. They include charging by case stage, by type of product or service involved in the complaint, or through an initial fee with an outstanding fee payable on closure.

Since its inception in 2001, the FOS has had a flat case fee structure, with the exception of a temporary supplementary case fee for PPI complaints.

The Ombdusman listed administrative simplicity and reduced risk of creating unhelpful incentives as benefits for this structure.

The FOS adds: “The reality is that cases vary widely. Some cases cost much more than our current £750 case fee to resolve, while others cost less.

“We want to review whether a differentiated case fee model would more effectively ensure that the financial business against which a complaint has been made pays the costs of their complaints.

“We also want to understand whether it would incentivise firms to engage with us more constructively.

“Differentiated case fees could allow us to more easily recover the costs of dealing with a case based on how many stages in our casework it needs to go through, or how complex the case is.”

Yet the FOS did not exclude to retain the current flat case fee structure.

FOS interim chief executive and chief ombudsman Nausicaa Delfas says: “As part of our commitment to change and improve to deliver a better service for our customers, we are today inviting views on proposals to change our funding model.

“This is to ensure that the FOS’ funding is sustainable for the future, is more transparent in its management of fixed costs, and more closely reflects the actual costs of resolving over 150,000 diverse complaints each year.”

The FOS recently appointed Abby Thomas as its next chief executive and chief ombudsman.

She will take up her new role and replace Delfas in the Autumn.