Introduction and executive summary
The Financial Ombudsman Service (FOS) was set up by Parliament to provide an
important, impartial service to both consumers and financial services firms. By
resolving disputes with minimal formality and decisions that are legally binding, the
FOS gives consumers the means to get free and fair redress where otherwise it would
simply not be possible. It does this through a process with human judgement at its
centre, often about problems that matter hugely to the people concerned. But
although it was established in 2001 to overcome an imbalance of power between
individuals and financial businesses, the FOS is not a campaigning consumer champion
or a regulator, and that is not always well understood or explained.
In recent years the FOS has faced unprecedented external pressure: mass complaints
about Payment Protection Insurance (PPI) and, more short-term term lending; a
relatively small but important caseload of complex problems, for example, complaints
involving vulnerable consumers and certain products such as pensions and
investments; and demand for a speedier resolution in a digital age while markets also
change at a growing pace.
This review of the FOS was prompted by concern that some of its staff were not
behaving appropriately and fulfilling the organisation's legal duty as they should. A
number of specific issues were raised by the Channel 4 programme Dispatches in
March 2018, many centred on the way in which complicated casework is being done
and how the FOS organises its people.
There is also concern about whether recent media attention means there is an
underlying, institutional problem at the FOS. While most of the stakeholders
interviewed for this review felt that some coverage has not accurately portrayed the
organisation they know, it has given pause for thought, in particular as to its
capabilities, how it meets new demand, and whether its recent reorganisation has
directly resulted in consumer detriment.
The role of the Financial Ombudsman Service
About one in ten of all complaints to financial services firms are eventually handled
formally by the FOS, and many more consumers are given free information and
guidance when they contact the service. This generates insights into the market that
have wider value for the majority of people who do not use the FOS, of because the
organisation can use its knowledge to bring about positive change in business
behaviour. Along with its powers to resolve individual disputes, this preventative role
that the FOS can play through effective engagement with consumers, firms, regulators,
and the government should be at the forefront of any ombudsman scheme's strategy
and the government's evolving approach to alternative dispute resolution generally.
In general, this review has found support for the organisation, including strong
advocacy for its work among the consumers I met face-to-face (despite a range of
experiences with service quality), and an appetite for more of its preventative work.
No stakeholder expressed the view to me that the FOS is unnecessary or overly costly.
But there are legitimate frustrations about the speed with which the FOS resolves
disputes, and concerns about the quality of some casework. This is not new: balancing
fast, fair and free to the consumer has been a tension for the FOS since it was created.
The FOS continues to face major challenges as it struggles to balance the competing
demands of increasing speed and quality, resolving its remaining PPI caseload and
keeping costs under control. Internally, long-considered, well-intentioned but difficult
changes to the structure of the organisation have placed new demands on a large
workforce facing an uncertain future. A new approach to case-handling, aimed at
bringing ombudsmen closer to consumers, with better problem solving and earlier
dispute resolution, has come with different risks to service quality.
Against this background, the potential for the FOS to get it wrong for consumers has
arguably been higher recently than might otherwise have been the case. The
important advisory and preventative roles have not been given the recognition and
support they deserve either, in part because of the nature of the funding model. And
there remain critical risks to the quality of the service's work, including people,
leadership, technology and costs. There are uncertainties as to future resourcing, and
while morale appears to be improving as a new organisational design is adapted, a
number of experienced staff are disengaged.
Despite this, I have found that people at the FOS have strongly-held and positive
values. They believe in its mission and want to 'do the right thing', while recognising
the need to improve. There are, and have been, a range of initiatives aimed at
mitigating the risks to the service, some prompted by internal learning, for example in
response to a negative staff survey in 2017.
The FOS now has the opportunity of this external review and its recommendations to
take stock and do more to improve consumer confidence in the quality of its work, to
extend its preventative work, and to ensure the right organisation is in place for the
future, fit for the possible extension of its scope to handle larger SME complaints. This
should start with a new strategic plan and, with the support of the FCA as necessary,
appropriate positive action for improvement, especially in the following areas:
- Casework handling capability for new complex complaints
- Information technology and data
- Quality assurance and complaints about the FOS
- Staff management and internal communications
- Funding that supports strategic priorities
- Strategic planning and risk management.
In summary, I have found that the FOS provides an effective and essential service for
many thousands of people. It is important that more consumers use the FOS,
knowing that it is not institutionally biased against them, while realistic about its
limitations and aware of their right to escalate complaints. But to retain public
confidence the FOS must work hard to continuously improve the service it provides
for consumers and businesses.
FOS can be painfully slow.
We have had two successful cases against Azzure and the banks this week but it has taken well over 12 months!
I think the problem is one of budget versus the sheer volume of timeshare related claims that are now being submitted.
at least the FCA seems to be doing something about it
yes buts noy about the fca, its the rubbish service of fos.. good speach the other week end at leeds mr Boyd