Former ‘Which?’ executive director Richard Lloyd has completed his independent review of the operation of the Financial Ombudsman Service (FOS). This review has found that there may be issues with the knowledge of some the Service’s investigators, however there was no evidence that the decision-making process is biased against customers.

Mr Lloyd said:

“The data shows no significant correlation between the reduction in pressure and uphold rates – in fact there was a slight reduction in uphold rates.

“This suggests that, overall, ‘target pressure’ did not incentivise caseworkers to reject cases in favour of businesses.”

On the subject of the knowledge of the FOS adjudicators, Mr Lloyd suggested this may be lacking, especially for some of the more complex products. He has called for further development of training, policies and procedure guides. He commented:

“As it adapts its casework model, based on the investigation model which relies on staff being skilled across a range of different types of cases, the Fos has recognised that where these higher risks arise, case-handlers require more support, or that the problem needs to be looked at by an experienced product expert with up to date knowledge.

“New investigators can lack knowledge, confidence and consistent exposure to complex problems, and so more often use internal helplines and product specialists for advice.”

Another criticism made of the organisation was that it has been prioritising ‘efficiency of service’ over maintaining quality standards, and Mr Lloyd has recommended that this is addressed.

Finally, the recommendations asked the relevant authorities to consider whether a new system of funding the Service may be more appropriate – one based on the risk each firm poses.

Caroline Wayman, chief ombudsman, said:

“We are grateful to Richard Lloyd for conducting such a thorough review.

“We’ll be considering carefully what it means for our service, keen to learn from the past so we can do things even better in the future. We will publish an update on our progress by the end of the year.”

Mr Lloyd and the Chief Executive and Chair of FOS will appear before the Treasury Select Committee in the week commencing July 16, where they can expect to be questioned about the review.

The review was commissioned to look at concerns raised by the Channel 4 documentary Dispatches, where an undercover reporter found evidence of staff siding with firms in disputes in order to meet their targets, and of a lack of staff training on complex products.

Quotes from FOS staff who made anonymous contributions to the undercover reporter included:

“Training was not adequate. We rushed through complicated financial issues and processes. I often didn’t know what I was doing.”

“I’m not proud to admit it but I’ve done it myself – just taken a chance and just slung stuff through, with any old decision.”

“Sometimes I’ve not even heard of the products. I have to Google what it is first.”

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