Financial Ombudsman Service: Court Confirms £100,000 Limit For Awards

Article by Jeremy Barnes, Rob Morris and Caroline Kennedy

Despite recent attempts by the Financial Ombudsman Service to circumvent the monetary award limit, the High Court has today confirmed that it does not have the power to make a binding award requiring a redress payment in excess of £100,000.

The case involved two complainants' attempts to enforce supposed "directional" awards made by the FOS. Enforcement of the awards would have required the firms involved to pay redress well over the £100,000 monetary award limit, effectively rendering the limit pointless. This was precisely what the FOS, who were represented in these proceedings, argued in favour of.

CMS Cameron McKenna acted for the firms, who were successful in defending the enforcement proceedings. The Court decided that the FOS did not have jurisdiction to make any kind of binding award that resulted in a firm having to make a redress payment of more than £100,000.

Thankfully for regulated firms and their insurers, this decision restores some much-needed certainty. Firms can now be assured that any payments will be limited to the £100,000 statutory cap, no matter how the FOS might term the award.

To view the article in full, please see below:

Full Article

Despite attempts by the Financial Ombudsman Service to circumvent the monetary award limit, the High Court has today confirmed that it does not have the power to make a binding award requiring a redress payment in excess of £100,000.

The decision ruled on two separate claims where a complainant had obtained a Financial Ombudsman Service award in his favour. In each case, the award appeared to require a redress payment of more than £100,000. In one, it was well over £1 million.

The FOS has the power to make two types of binding awards:

(i) A monetary award limited to a maximum of £100,000. Although FOS can recommend that an investor be paid in excess of £100,000, an award above this limit is not binding;

(ii) A directional award; that is, a direction that the firm takes such steps as FOS considers "just and appropriate". This type of award is not expressly subject to a financial limit.

Given the apparent cap on financial awards, the two firms involved refused to pay the complainants more than £100,000 redress. The complainants brought claims seeking to enforce the FOS decisions, arguing that the decisions were directional awards and were not subject to any financial cap. The FOS actively participated in the trial and...