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MPs have accused the chair of the Financial Ombudsman Service of “disrespectful” behaviour, saying she tried to stop them finding out that the body’s chief executive was sacked after a “mutual collapse in confidence”.
The scathing findings by the House of Commons Treasury select committee add to a deepening crisis at the FOS. Its powers are set to be curbed by chancellor Rachel Reeves in her Mansion House speech on Tuesday after it became a lightning rod for City criticism of regulators.
MPs have been frustrated by FOS chair Baroness Zahida Manzoor’s refusal at a February hearing to explain why its chief executive Abby Thomas left the ombudsman unexpectedly that month after less than three years in the job, except for repeating that it was “a mutual agreement”.
Manzoor continued to resist answering the committee’s questions after the hearing, demanding the MPs promise to keep any answers confidential and arguing that she could not be compelled to provide information because she was a member of the House of Lords, the committee said.
The MPs said on Monday that argument, while “strictly true”, was “unnecessary and disrespectful”, adding that peers taking leadership roles at public bodies must accept scrutiny from the Commons.
Manzoor only answered the MPs questions after they compelled the FOS to disclose key documents around Thomas’s departure. Those records showed she was dismissed by the board after “fundamental disagreements” over strategy, management and operations led to a “collapse in confidence on both sides”, the committee said.
It did not publish the documents, but said the collapse in confidence that led to the board firing Thomas “covered a broad range of issues and was not driven by a single event or topic”.
“I’m afraid that the handling of this situation by the senior leadership of the Financial Ombudsman Service has been deeply disappointing,” said Meg Hillier, chair of the Treasury select committee.
Hillier said the failure of FOS directors to frustrate the committee’s inquiry “sends a clear message to any organisation considering similar action in future” that MPs will get answers “whether senior officials attempt to block them or not”.
Baroness Manzoor, who plans to step down as FOS chair at the start of August, said: “I am committed to providing open and transparent evidence to the committee, but there are rare instances when that can be difficult — particularly when it relates to employment matters.”
Thomas was under pressure to take a less consumer-friendly approach, according to a person familiar with the matter, who said the ombudsman’s board was frustrated at her reluctance to start charging claims-management companies for bringing cases — a step it has since taken.
The upheaval underlines how the usually low-key body — which deals with consumer complaints against the financial sector — has come under scrutiny for its role in the multibillion-pound scandal over car loans, following claims by City firms that it was deterring investors in the UK.
City minister Emma Reynolds said last month that the ombudsman would be overhauled to stop it acting like “a quasi-regulator”. This opened the door to the potential introduction of a new appeal process for companies to challenge its decisions if they are seen as contradicting the rules set by the Financial Conduct Authority, the main watchdog.
“The Financial Ombudsman Service plays a vital role in maintaining consumer confidence, but it is clear that the way complaints are currently assessed can occasionally create uncertainty for firms, especially where decisions depart from existing and established FCA rules and guidance,” said Simon Harrington, head of public affairs at the Personal Investment Management and Financial Advice Association.
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