The current limit is £150,000 and this will rise to £350,000. This change will become effective on 1st April and apply to all actions that happen after that date. For complaints raised with FOS after the effective date that relate to earlier actions, the compensation limit will rise to £160,000. This increase in potential penalty puts further onus on firms to act in customers’ best interests.
In addition, FOS is extending its jurisdiction to allow more firms to use the service. Previously only businesses with a turnover or annual balance sheet of less than 2m euros and employing less than 10 people were eligible to complain through the ombudsman. The ‘Eligible Complainant’ definition will change to include enterprises with an annual turnover of under £6.5 million and an annual balance sheet total of under £5 million or fewer than 50 employees. This move extends the service to a far greater number of firms who can now seek recourse against detriment from their financial services provider.
FCA’s new rules for the Rent to Own market are effective from 1st April as follows:
- The total credit cost cannot exceed 100% of the cost of the goods, including delivery and installation
- RTO firms must benchmark base prices against 3 other retailers, none of which can be a RTO firm and only one of which can be a catalogue credit firm. The maximum base price the RTO firm can charge is the highest of the 3 retailers (if none of them is a catalogue credit firm) or the median price (if one of the firms is a catalogue credit firm). The benchmarking includes delivery and installation costs.
- RTO firms are prohibited from trying to recover the lost revenue from these provisions by raising the price of other goods or services sold alongside the RTO agreement.
- RTO firms must establish written policies and procedures for benchmarking prices which must be approved by their governing body and reviewed periodically.
- Agreements that breach the cost cap will be unenforceable in their entirety.