The reorganisation of the Financial Ombudsman Service (Fos) was "high risk" and contributed to case handling problems at the service, according to the man who reviewed it.
Richard Lloyd, the former executive director of consumer rights organisation Which, was speaking to the Treasury select committee today after finding there was no institutional bias against consumers at the Fos.
His 53-page review, published earlier this month, was launched after allegations made in the Channel 4 programme Dispatches that some decisions made by ombudsmen may have not been fair to consumers.
Mr Lloyd largely exonerated the Fos but he warned the service's strive for efficiency had begun to be seen by staff at the service as the "overriding priority" and he recommended that management shift the focus onto quality.
Another concern raised by Dispatches was that investigators did not have the knowledge to handle complaints, and Mr Lloyd found this could be the case for people new to the role - particularly given the Fos' move to a new model without specialisms.
Mr Lloyd said some of the issues raised by Dispatches were caused by the recent reorganisation which changed how complaints are handled.
The Fos' reorganisation has been taking place since 2016 with the aim of making it more responsive, and has consisted of a new structure where the person who first receives the complaint will consider the complaint - regardless of whether it is about a type of product they have specialist knowledge of or not.
Under the previous structure complaints were assigned to an adjudicator with specialist knowledge about the type of product the consumer was recommended.
Mr Lloyd said one of the problems with the reorganisation was that it had been "quite top-down" which had affected morale.
He said: "The principles behind [the reorganisation] weren't wrong at all. This notion that you need to have a modern organisation talking to consumers, resolving problems earlier and expertise nearer to the front line.
"The hot debate within the organisation has all been about how you do that effectively and without putting casework quality at risk.
"What I think was unwise was the scale of the change at the pace the organisation wasn't prepared to take on. For me it was about not having enough time to prove that model could be done without affecting morale and in that respect I think it was done with too much haste."
He added: "The change was high risk. The counter to whether or not they should have taken that risk is that not changing was equally risky."
Mr Lloyd also highlighted that the Fos was not set up to handle the volume of complaints it has faced with payment protection insurance, nor claims management companies which, he found, can cause backlogs by threatening legal action.
He added that plans to give the Fos new powers to handle complaints for small businesses - in response to the controversy surrounding Royal Bank of Scotland's treatment of small businesses - may have to wait while the service addresses the issues with its reorganisation.
Mr Lloyd said: "I think if they quickly respond to what I have said they need to do and they have a credible plan to put in place the right capabilities for dealing with another set of complexities and another set of issues then I think they could [take on new powers].
"For me it is all about, in the time they have got available, putting in place the right strategy, being very realistic about the capacity they need, before they take on more complexity."
Mr Lloyd also disputed that the review was a "whitewash" when grilled on why he had only looked in detail at three cases.
He said the terms of reference of the review had only asked him to look at the issues raised by the cases highlighted on Dispatches, and he highlighted the short period of time he had been given to do his work.
Mr Lloyd added: "If you could show me an individual who, in the course of two months, could review 1.5 million cases, I would be delighted to meet them.
"Your terms of reference were very clear: that I should look at underlying problems, that I should look at those 14 issues and that's what I did in the time available."
Among the allegations was that staff at the ombudsman found in favour of firms because it was deemed "easier" but Mr Lloyd said both consumers and firms could have confidence the service was not institutionally biased against them.
Dispatches also reported the ombudsman had been churning out decisions as it scrambled to meet targets and this meant decisions were more likely to go against consumers.
Mr Lloyd said he looked at data which showed there was no institutional bias nor was there a significant correlation between the reduction in pressure and uphold rates and he said many people he spoke to at the Fos regarded the allegations with "horror".
He said: "Some people have spent their entire careers there because that's what drives them. That's the biggest guard against bias: the culture and the values of the place."
damian.fantato@ft.com
