Lawmakers demand answers over sudden exit of chief financial ombudsman

The chairs of the Financial Conduct Authority (FCA) and the Financial Ombudsman Service (FOS) have both been asked to provide an explanation, and a timeline, for the “sudden departure” of chief executive and chief ombudsman Abby Thomas, which was announced on February 6.

The Treasury Committee has asked FOS chair Baroness Manzoor if the board had issues with Thomasʼs performance, and when it was notified that she planned to leave. The committee also wants details of any severance payment.

Separately, Treasury Committee chair Meg Hillier asked Ashley Alder, FCA chair, when he was first notified of Thomas’s departure and if the regulator had played any role in it. He was also asked if any severance payment for Thomas had been agreed.

Responsibility

The letters were issued following a sometimes combative select committee hearing, which saw Hillier remind Manzoor of her responsibility to answer questions from the committee. Manzoor confirmed there was “no gagging clause” in place around Thomas’s departure and dismissed press reports that it was connected to the FOS board’s decision to impose a £250 per case fee on claims management firms. She repeatedly said Thomasʼs exit was by “mutual agreement” but would not be drawn on when she became aware of it, or about any severance payment.

Motor finance

Additionally, Manzoor said Thomas’s departure was unconnected with motor finance claims. Two decisions published by the FOS in January 2024 prompted the FCA to launch a market-wide investigation into historic sales of motor finance involving discretionary commission arrangements (DCA) that enabled brokers to earn higher commission in return for charging the customer higher interest on their car finance.

Following the FCA’s intervention, analysts at rating agency Moody’s put the likely cost of redress for mis-selling car finance at £30 billion. The outcome of the FCA investigation was itself subsequently delayed pending the outcome of two separate legal proceedings — an appeal by Barclays after it lost a judicial review against the FOS for one of the January 2024 decisions, and an appeal to the UK Supreme Court about three cases originating in the County Court.

In May 2024, the FOS paused issuing any further decisions on DCA cases, and these remained on hold pending the Barclays appeal. The Supreme Court is set to hear a separate appeal related to the three cases that came through the court system in April, which is also expected to have a bearing on any further DCA-related decisions issued by the FOS.

Interim chief ombudsman James Dipple-Johnstone said the FOS had more than 60,000 cases relating to motor finance commissions, which a team was working on pending the outcome of the legal cases.

Referring to correspondence she had received about the FOS first being warned about widescale problems with DCA sales in 2016, Treasury Committee member Siobhain McDonagh asked if the FCA had, at any time since 2016, put pressure on the FOS or “directed it” as to how it should deal with DCA complaints.

Both Dipple-Johnstone and Manzoor said “no”.

Call for input

In November, the FCA and the FOS published a joint call for input on how they can improve the latter’s service.

Manzoor told the committee that the FOS was considering simplifying its process, and that she wanted “very clear” powers so it could dismiss cases that were “not appropriate to come to the service”.

Dipple-Johnson said the FOS would also start collecting data on any vulnerabilities that individuals bringing complaints had. All 2,000 of its case workers had been trained in understanding vulnerability, Manzoor added.

MP Bobby Dean asked about the proposal to remove the automatic right of consumers to request an ombudsman review of a decision made by one of the FOS’s case workers. Dipple-Johnson said currently the percentage of case worker decisions overturned by an ombudsman review varied between 7% and 19%.

Dean asked if reporting “rogue” claim management companies (CMCs) to the Solicitors Regulation Authority (SRA) or the FCA might not be a better way of dealing with such firms, rather than imposing case management fees on all CMCs. Vulnerable consumers might prefer to use a CMC to bring a case against a financial firm, he added.

CMCs could bring 10 cases to the FOS before incurring the £250 fee, Manzoor said. This covered 82% of all cases brought by CMCs, she said, adding that 92% of vulnerable consumers chose to take their case to the FOS directly.

Manzoor and Alder were given until February 18 to respond to their respective letters.