The Treasury select committee has said it is "doubtful" that the Financial Ombudsman Service (Fos) is ready to handle complaints from small businesses.
In a letter to the regulator sent on Monday (23 July) the committee expressed scepticism about whether the Fos will be able to handle an expanded remit in light of the findings of an independent review into the service, which found it had struggled with the demands of its recent reorganisation and the large number of payment protection insurance (PPI) complaints it had continued to receive.
The Financial Conduct Authority is currently consulting on proposals to allow more small and medium-sized enterprises to refer disputes to the Fos.
But Nicky Morgan, the committee's chairwoman, wrote: "The FCA has proposed expanding SME access to the Fos from December this year. The committee is doubtful as to whether the Fos is ready for an increase in its remit within the FCA’s timeline.
"The proposals should not be pursued at the expense of sound decision making and appropriate training and recruitment at the Fos.
"The already-damaged public confidence in the Fos will be damaged even further if these changes are rushed through."
Andrew Bailey, the chief executive of the FCA, said he would consider Mrs Morgan's points "carefully".
The committee had recommended the Fos conduct a review of its case work from the period at the beginning of its reorganisation in 2016.
It comes after the committee heard evidence from the Fos and the man who recently conducted an independent review into the service, following allegations made in the Channel 4 programme Dispatches that some decisions made by ombudsmen may have not been fair to consumers.
In response to this, Caroline Wayman, the Fos' chief executive, said the body was already planning to audit a statistically significant random sample of decisions made at the time of the reorganisation, which will have "independent verification".
Richard Lloyd, the former executive director of consumer rights group Which, who carried out the independent review, had dismissed concerns about institutional bias in favour of financial institutions at the Fos, but had raised concerns about the restructure which took place in 2016.
He had warned on the effect it had on morale and that the service's strive for efficiency had begun to be seen by staff at the service as the "overriding priority".
Mr Lloyd also said the Fos had been "completely distorted" by the huge number of PPI complaints it had received.
damian.fantato@ft.com
