A damning investigation aired by Channel 4’s Dispatches programme alleged widespread failings at the Financial Ombudsman Service in the way cases were handled, stemming from lack of staff training and a general low morale among its workforce.
The programme claimed 500,000 payment protection insurance (PPI) complaints needed to be looked at again as they were at risk of not having been decided fairly.
The Personal Investment Management and Financial Advice Association (Pimfa) has called for a reopening of cases in potential dispute but Caroline Wayman (pictured) suggested this may not be possible.
Besides, she said, the 500,000 figure given in the programme appeared to represent every PPI complaint that hasn't been upheld (since 2010 to 2011 Fos has not upheld - which is in total 495,877 cases.
But not every PPI product was inappropriate for every consumer, she said.
In a letter to the Treasury select committee, the ombudsman's chief executive wrote: "As a body established under statute, as an alternative to the courts, providing finality in dispute resolution is an important principle for the ombudsman service.
"The circumstances in which we can reconsider a complaint are extremely limited.
"We may, however, consider the matter afresh if material new evidence subsequently becomes available which the ombudsman considers likely to affect the outcome.
"And, as a public body, our decision-making is of course subject to judicial review – which means our decisions come under scrutiny by the courts."
But the Treasury select committee's chairman, Conservative MP Nicky Morgan, said the term 'new evidence' should include the Fos' alleged failings raised by Dispatches.
She said: "The Financial Ombudsman Service is essential in underpinning consumer confidence in the financial services industry, and in redressing the power imbalance between large financial institutions and their customers.
“It is troubling, therefore, that cases may not have been decided correctly. As Ms Wayman says, it is right that cases be reopened if there is any new evidence that might affect the outcome. That must surely include failures in the Fos’ own processes."
Ms Morgan had written to Ms Wayman shortly after the programme was aired to demand answers on a number of allegations made.
Ms Wayman said an independent review would be undertaken at the service to detect and rectify any failings.
Among the allegations was a reluctance to issue public decisions for fear of creating a precedent and a potential bias to decide in favour of a bank so the case could be closed more easily.
But Ms Wayman said the ombudsman had always been open and transparent in its dealings and was publishing case studies on its websites to help promote fairness in financial services.
She said the ombudsman had checks and balances in place to ensure impartiality, including in the way it trains its staff and its appeals process, which allows businesses and consumers to appeal the first decision reached by an adjudicator before it goes on to the ombudsman.
Several thousands of cases were also checked each month to ensure quality control, she said.
Dispatches also pointed to a backlog of cases at the Fos, including seemingly forgotten cases and unopened correspondence.
Ms Wayman conceded there had been periods where the service was under increased pressure from large case inflows and pending judicial decisions (British Bankers’ Association challenging the Financial Services Authority and Fos in 2011; Plevin vs Paragon Personal Finance in 2014).
But she said the length of time people had to wait for answers has come down since then.
She said: "We just don’t recognise these specific claims. But as with all the issues arising from the programme, we will ask for the independent review to clarify the precise concerns raised and for it to consider them.”
She also denied allegations of improper staff training, saying staff were sent through six months of training which included "aspects of the law and regulation, which are relevant to our work. It also covers product-specific knowledge, evidence gathering skills, how we work and the standards we require."
Lastly, Ms Morgan asked for clarification around a visit to the service by Labour MP Rushanara Ali, which the programme said, was stage managed to make the ombudsman look better.
Ms Wayman wrote: "We were very disappointed with the suggestion that we misled Rushanara Ali MP on her visit to the service in 2015.
"We are satisfied that, although of course we wanted to make a good impression, our preparations for the visit were entirely proper and there was no attempt to mislead her in any way.
"I have offered to meet with her in person to provide further reassurance."
Ms Morgan said: "The independent review must consider the Financial Ombudsman Service's approach to decision-making, the assurance process, and the causes of low staff morale.
"The committee will want sight of the terms of reference before they are finalised. The review should be demonstrably independent, all findings of the review should be published, and the committee will expect to take evidence from the reviewer."
She said she would write to Ms Wayman to set out the committee’s expectations of the review, and would consider whether further action is required in response to the latest correspondence.
Steven Farrall, senior partner at Williams Farrall Woodward, said: "The Fos is fundamentally flawed. It is not the rule of law it’s rule by bureaucrat."
But he said calling for a review of cases would only put more cost on the industry not the Fos.
"This is double jeopardy. In the private market were a company to fail so comprehensively as the Fos it would go out of business. Why then is it right that even more wealth be pumped into an existing organisation to get it to sort out problem its failure created.
"Why should I collect even more money from my clients to pay for Ms Wayman and her crew’s ongoing failure."
carmen.reichman@ft.com
