The new European Convention on Human Rights that comes into force next week could cause a massive upsurge in the costs of the Financial Ombudsman Service, its chief, Walter Merricks warned last week.

During a workshop at the Chartered Insurance Institute conference, Merricks said that, from now on, public bodies such as the FOS would have to grant complainants a hearing instead of simply informing them of its ruling by post.

“If you are a public body determining people's human rights, you have got to give them a fair hearing,” he said.

Not just that, the new rules will apply to insurers and banks giving them “human rights”. It could cause a huge upsurge in the FOS's workload.

Merricks said he had “no idea” how much the changes would cost, but said the FOS had made “conservative” estimates.

He said that in the next year, the FOS expected complaints to cost an average of £780 each, largely because the watchdog had to strengthen weaker ombudsman schemes to bring them all under one umbrella.

“Many of the ombudsman schemes we have taken on were Cinderella organisations that were under-funded and under-invested. Many needed new management in a number of areas.”

The chief ombudsman said he was hoping to bring the cost of the average cost of complaints down to their current levels of £730 by 2003, adding that it was his ultimate aim to make the scheme redundant.

“One of our long-term goals should be to be put us out of business. I would like to get to a stage where the number of complaints against us reduced to a level where there was no need for an ombudsman service,” he said.