FOS monetary limits receive industry support


By Elizabeth Somerville

Email Article Print Article

Recent industry consultation performed by the Financial Ombudsman Service (FOS) has confirmed general support for the monetary value of its current compensation measures.

“We recently conducted consultation of proposed changes to our Terms of Reference (ToR), which took submissions on, among other things, our jurisdictional monetary limit and compensation cap,” a FOS spokesperson told financialobserver.

“We received 21 submissions from industry and consumer representatives, most of whom were not in favour of increasing the limit and cap beyond that currently provided in the ToR.

“Based on that feedback from our stakeholders we are not planning to implement any increases in our monetary limit or cap.”

Among the groups that advocated for no changes to be made to the monetary limit and compensation cap were the FPA, the Financial Services Council (FSC) and ANZ.

In its submission to FOS’ proposed terms of reference changes, the FPA said: “[We] would be concerned about any increase to the jurisdictional limit or the compensation cap in the absence of any actuarial evidence demonstrating a clear need for the increase.

“Publically available data shows that there has been no dispute which has involved a compensation payout of the amount of the current cap of $280,000, or even close to the current cap.”

The FPA’s submission also drew a link between FOS’ 2012 increases and the “significant increases in professional indemnity insurance premiums experienced by financial planners”.

“The FPA is particularly concerned about the impact on professional indemnity insurance premiums and the subsequent threat to small licensees,” it said.

This view was shared by the FSC whose submission said: “[The current limit] provides more than adequate access for consumers.

“Allowing high value matters to be dealt with by FOS would only add to the body’s existing dispute backlog, circumvent the purpose of a consumer complaints scheme (as opposed to a court), and negatively impact on the availability of professional indemnity insurance.”

Of the submissions received by FOS, only a few supported increases to the monetary limit and compensation cap, and these advocated significant increases, the ombudsman said.

These included the Australian Bankers’ Association (ABA) and a joint submission from the Financial Rights Legal Centre and Consumer Action Legal Centre.

“We believe the compensation caps are set too low and should be increased,” the submission from the Financial Rights Legal Centre and Consumer Action Legal Centre said, adding the current cap was not sufficient to compensate for loss.

“[The indexation of caps] will only index the caps from one inadequate amount to another inadequate amount.”

FOS’ current jurisdictional limit for claims the body can receive is $500,000, and the compensation cap for each claim is $280,000.

Compensation caps are required to be indexed every three years with the next indexation increase scheduled to take place on 1 January 2015.

« Back to Articles