Caroline Wayman, the Chief Ombudsman and CEO at the Financial Ombudsman Service (FOS) has resigned, announcing on 10 March 2021 on LinkedIn that:
After 22 years at the service and nearly 7 years as chief executive and chief ombudsman I am stepping down from the role.
Her resignation comes the day after a highly critical article in the Daily Mail which pointed out:
Fraud victims and cheated consumers are waiting more than two years for justice due to an unprecedented backlog at the Financial Ombudsman Service (FOS).
Criticism of FOS for several years
In 2016 a major reorganisation at FOS aimed to shift more casework to be performed by generalist investigators rather than specialist teams.
Backlogs of cases began to build up in some areas.
A C4 Dispatches documentary in 2018 alleged that FOS staff had inadequate training and understanding of the financial products they were making decisions about.
In January 2019 Wayman was asked by the Treasury Select Committee about waiting times after a whistleblower said the time for a case to be allocated to a first-level investigator was ten times longer than before the reorganisation. And that 8,000 cases were in a queue for a second-level Ombudsman decision.
The impact of coronavirus appears to have had a significant impact on the effectiveness of the FOS, with over 56,000 cases open for more than six months and over 23,000 open for more than two years.
As the Committee expressed in our recent evidence session, there are concerns about the FOS’ budget. It costs the FOS on average £960 to resolve a case, against the case fee of £650, and it’s funding its expenditure through its reserves.
Backlogs have reached alarming levels
I don’t think the switch to generalist teams was a good move. Financial products tend to grow ever more complicated. Whether it is a complaint about an insurance payment not being made, a car being sold on unaffordable finance or a bank not refunding money after a customer was scammed, you want your case to be looked at by an expert team. Having seen a lot of similar cases and knowing what questions to ask the firm about is often the key to getting a fair decision.
But the increasing delays in resolving FOS cases cannot be put down to this.
As I wrote in January in Lessons from Amigo – FOS complaint handling needs to be faster there are three big problems with the current FOS complaints systems and only one of them is the level of FOS staffing and its structure. The other two are:
- Firms are not upholding complaints in line with FOS decisions: Firms should make decisions in-line with what they know FOS does – this is already part of the FCA’s rules but is too often ignored by firms. FOS cannot change this by itself, the FCA has to enforce its rules and insist that firms change their current practices. Then most complaints would never have to go to FOS, which could be kept for deciding difficult or marginal complaints
- There is a financial incentive for firms to go slow on FOS cases: This has to be removed. FOS should invoice at the start of a complaint not the end. And lenders that delay sending paperwork to FOS or delay responding to FOS investigator decisions should have to pay a fine to the customer.
The next FOS CEO needs to act fast
The latest FOS statistics, published a week ago, show dramatic increases in complaints coming though, with Wayman saying:
“Excluding PPI, new complaints are up by over 55% compared to the same period last year, with more and more people asking for our help to resolve problems with financial businesses.”
so it is becoming increasingly urgent to resolve this problem.
It has to be at the top of the list for the incoming FOS CEO once he or she is appointed.