The Financial Ombudsman Service (FOS) is proposing to more than double its maximum membership fee to fund improvement of its services.
In its Fee Review Consultation Paper, FOS proposed to increase the maximum membership fee from $11,000 to $25,000.
“When the fee model was introduced in 2010, this was done so without detailed information on the numbers and outcomes of disputes under the new terms of reference,” said chief ombudsman Shane Tregillis.
“The proposed changes to our funding arrangements are designed to support FOS’s Business Plan efforts to eliminate our backlogs and provide a more timely and quality dispute service going forward as requested by stakeholders in recent feedback.”
Furthermore, FOS had a $1.7 million deficit in 2012-13 financial year and is forecasting an increasing deficit this year.
“While our accumulated reserves are currently sufficient to cover the shortfall, successive years of deficit are not sustainable,” Tregillis said.
“We know we need to contain costs as best we can, and secure a revenue base that allows us to meet stakeholder needs.”
FOS members pay for its services through three payment types: membership levy, user charge and dispute fees.
The ombudsman service is also proposing an increase to the user charge as a proportion of FOS funding by returning it to 2010-2011 level and by minor rebalancing of fees to be more aligned to costs.
“These changes will allow us to respond to any increase in our operational costs, cater for the volatility of demand and increasing dispute and environmental complexity, while investing in efficiency and cost containment initiatives to meet the service needs of our members and the Australian public.”
Call for a cap
The Financial Services Council called for a capped maximum fee for conglomerate groups which own multiple Australian Financial Services Licensees (AFSLs).
In acknowledging the size of the proposed increase, FSC’s submission to the consultation paper pointed out that this would be a particularly significant increase in total fees for large institutions, many of whom are members of the FSC.
“Irrespective, particularly given the more than doubling of the maximum membership levy, we submit that FOS should consider an upper cap on the aggregate maximum levy applied across related entities (which are also FOS Members) forming part of the same corporate group,” the FSC submission read.
“FOS may wish to explore or benchmark whether there are similar fee (capped) regimes in other external dispute resolution (EDR) schemes in respect of members of the same corporate group.”
The FSC also pointed out that, where a member has no or negligible cases registered against them, the increase in the membership levy would represent a significant increase in their total FOS fees.
