Commenting on AMI’s response, Chris Cummings, AMI Director General said:
“We firmly support the move away from the current method of funding FOS to one which charges a flat rate fee per firm plus more free cases.
“Of the options set out in the paper which propose new funding models, we favour Option F. This proposes that a case fee would only become payable from the sixth and subsequent cases. There would also be an annual fee per firm which would be around £175. This option would also simplify the scheme by removing the need for fee blocks and tariff tables.
“We believe that Option F best addresses the concerns of both small and large mortgage intermediary firms. At present mortgage intermediaries receive a relatively low level of complaints but there is concern that this could rise in the future. Option F significantly reduces the risk of small firms having to pay case fees for complaints made against them. For large firms, their funding of FOS would be proportionate to the number of cases they produce.”
AMI recently conducted research into the number of complaints members had received and their thoughts on whether complaints might rise in the future. The research revealed that:
· 77% of firms had received no complaints since ‘Mortgage Day’. 12% had received one to two; 4% had received three to five; 1% had received six to nine; and 6% had received 10 or more.
· The majority of the complaints received were never referred to the Ombudsman but 34 per cent did have one to two cases referred, 4 per cent had three to five, and 4 per cent had six to nine.
· 34 per cent of firms had seen the number of complaints they’d received increase since ‘Mortgage Day’.
· 78% of firms believed the number of complaints made against mortgage intermediary firms would continue to rise in the future.
Cummings continued: “As this is a discussion paper, we have also considered other funding options which we would like to bring to the attention of FOS. We believe serious consideration should be given to a complainant fee and to a pre-funding approach that would see firms pay at the time when a complaint is received by FOS, instead of at the time of the completion of the complaints procedure. The extra “working capital” this system would provide should be costed out to examine the impact on lowering case fees.
“In our view, a complainant fee (which could either be a deposit or a small sum), would help to deter the ‘have a go’ culture which seems to have developed in our industry. The current system has encouraged the growth in complaint management firms at a significant cost to our members. We believe the consumer right to complain is inviolate but so are a firm’s rights to expect a level-playing field between complainant and defendant.”
Concluding, Cummings suggested FOS should set up a ‘small firms division’. He said: “Smaller firms are unused to dealing with FOS and many find it difficult to present their case in the way in which the service requires. FOS case handlers need to remember that it is the individual mortgage intermediary who will pay both the case fee and any redress due. This means that the adviser concerned will want to see not only ‘justice being done, but also being seen to be done’.
“This is why we are proposing that FOS considers establishing a ‘small firms division’ - as the FSA has done - with experience of the mortgage intermediary sector and an understanding of the way in which they operate. This team would be allowed the flexibility to recognise the particular needs of smaller firms and would provide better access to oral hearings.”
