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Clause 60 - Funding of ombudsman scheme

Part of Consumer Credit Bill – in a Public Bill Committee at 5:30 pm on 28th June 2005.

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Photo of Gerry Sutcliffe Gerry Sutcliffe Parliamentary Under-Secretary (Trade and Industry) (Employment Relations and Consumer Affairs) 5:30 pm, 28th June 2005

I hope that my remarks on clause 60 will further clarify the funding of the ombudsman's scheme for the Committee. The clause sets out the arrangements for the funding of the compulsory ADR. In line with the best practice principles underpinning the funding of the ADR scheme, it should be self-funding and free to the consumer. As the clause states, all standard licence holders not already covered by the compulsory jurisdiction will pay to cover the costs of the FOS in setting up and running the consumer credit ADR.

Those costs will be met in two ways. First, businesses under the jurisdiction of the FOS will be charged a small levy, which will be set by the FOS with the approval of the Financial Services Authority. The levy is likely to be between £10 and £20 per year.

Secondly, a case fee will be payable by those businesses whose complainants are considered under the ADR scheme. The fee will also be set by the FOS with the approval of the FSA and is likely to be about £360 per case. The majority of firms will never pay the case fee. It is unlikely that all complaints will require ADR, and those firms that now come before the FOS get the first two cases a year free. The ADR levy will be collected by the OFT with the licence fees, and the money will be passed on to the FOS. The OFT is best placed to collect the money, as it already has details of the all Consumer Credit Act licences. The OFT can charge extra for costs incurred in collecting the levy, and the FOS will periodically reimburse the OFT. The clause is necessary to provide funding for the ADR scheme. I hope that I have made it clear to the Committee what we seek to achieve.