The Financial Ombudsman Service's case review has been criticised as "too process-driven" by the chairman of the Treasury select committee.
Nicky Morgan welcomed changes the Fos had made to the review process, but expressed concern they did not go far enough.
In particular, she said the review would focus too much on the process of how cases were investigated, and not on whether outcomes had been properly decided.
Following an independent review, the Fos had agreed to review cases which were ruled on during the early phases of its reorganisation in 2016 after concerns the service had placed too much emphasis on efficiency over quality during this period.
The Fos had originally proposed cases would be tested against the 'Wednesbury reasonable test', that is, the ombudsman’s decision would have to be considered irrational as well as unreasonable for it to fail.
But after criticism from Ms Morgan the Fos has now changed this and it will instead test whether the outcome was "safe", meaning whether it is one which a reasonable ombudsman would reach, taking into account their duty.
Ms Morgan said: "The Fos's decision to change how the outcome of cases in the second stage of the review will be assessed is welcome. 'Wednesbury reasonableness' set the bar far too high for cases in the second stage.
"However, the review remains too process-driven and doesn’t focus enough on case outcomes. Only 150 cases, or 1.9 per cent, of the 8,000 cases from the relevant period will have their outcomes examined.
"It will be difficult, therefore, to conclude whether there were systematic issues with case outcomes if the sample in stage two is not significant in size.
"The committee will no doubt examine these issues in further detail when it takes evidence from the Fos once the case review is completed in the New Year."
Richard Lloyd, who carried out the independent review, had found the 2016 reorganisation and the surge in payment protection insurance complaints meant the Fos's strive for efficiency had been seen by its staff as the "overriding priority" and he recommended that management shift the focus onto quality.
The Fos has agreed to commission Deloitte to carry out a review into a sample of cases against "the relevant controls and standards" and those which to not meet those standards will be reviewed again.
The independent Lloyd review was launched after allegations made in the Channel 4 programme Dispatches that some decisions made by ombudsmen may have not been fair to consumers.
It largely exonerated the ombudsman service, and dismissed concerns about institutional bias in favour of financial institutions, but raised concerns about the restructure which took place in 2016.
The Fos' reorganisation had the aim of making it more responsive, and 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.
damian.fantato@ft.com
