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The FOS – Is it time for a judge-led inquiry?

It is not often that a television programme about the financial service industry results in my mobile going into overdrive with messages from non-industry friends. That is, however, what happened during and after the Channel 4 Dispatches programme aired on 12 March 2018 which revealed the results of an undercover investigation at the Financial Ombudsman Service [FOS]. “Shocking” and “jaw dropping” were amongst the responses. At first, I was surprised at the response from those who I would consider typical consumers. Having ‘slept on it’ I am less surprised. There are, within the UK, a limited number of organisations that hold a ‘cherished status’ in our hearts. Until now, FOS was within that privileged group. But now industry commentators are calling for a root and branch independent review of the FOS organisation. Respected commentators have said “Enough is enough with FOS arrogance and incompetence”.

An independent service?

The FOS ‘strapline’ is “free and fair for everyone” and the ‘about us’ page, states, “We were set up by Parliament to resolve individual complaints between financial businesses and their customers. We can look into problems involving most types of money matters – from payday loans to pensions, pet insurance to PPI. If we decide someone has been treated unfairly, we have legal powers to put things right.” Such a bold statement suggests an independent service from an organisation that seeks out facts and does ‘right to all manner of people without fear or favour, affection or ill will’. An article in The Times newspaper highlights a worrying decision making process, “Asked whether it was easier to rule against complainants, they were heard to reply: Yeah, because you just need to make one call to the consumer, rather than trying to persuade the business, which is actually a lot harder.”

The FOS complaints data is well overdue

The PFCAs own data shows a reduction in the number of cases upheld in favour of consumers in recent months. The reduction had previously been explained as, ‘a temporary issue as a number of specialist cases had been ‘parked’ while awaiting specific guidance’. Who knows now what the actual reason is. The complaints data made available from the FOS is nine months old now as we still wait for year-end 2017, although it should be every six months. What are we missing?

The FOS has a history of failure

So where do we go from here? During the programme Baroness Altmann and a Member of Parliament, appeared incensed at the evidence they were shown and, in the case of the MP, questioning what she had been told and shown during an earlier personal visit to FOS. Both are now calling for the FOS management to appear before Parliament. There have been reviews of FOS before. In 2011, FOS invited the National Audit Office [NAO] to conduct a review of the efficiency of its operations. That review took place at a time when FOS was implementing a significant programme of change as a result of rapid growth in demand for its services. That review was, therefore, essentially a review of potential rather than an independent audit of the Service and, as a result, focused on whether the change programme was likely to address the key efficiency challenges FOS faced. In February 2016 the NAO issued a financial mis-selling report which, although wider in its brief, commented on the FOS backlog of unsettled claims finding that FOS failed to settle disputes in an acceptable length of time.

A judge-led inquiry reporting to the Treasury Select Committee

What is required? Consumers need professional help and they need a Service that they have confidence in and trust. Since there have been reviews in the past and the seriousness of the allegations, a process with significant investigative powers is being called for. Those calling for such a review may not have thought through what they are calling for, but in real terms, this means a judge-led inquiry reporting directly to the Treasury Select Committee.

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