MPs have voiced "concerns" over the running of the Financial Ombudsman Service and the more than 23,000 cases which have sat open with the service for more than two years.
A series of letters between the ombudsman and the Treasury Committee published today (January 29) reveal increasing scrutiny surrounding the service, its budget and case timescales.
Mel Stride, the committee's chairman, said the coronavirus pandemic had a "significant impact" on the effectiveness of the Fos, with more than 56,000 cases open for more than six months and in excess of 23,000 open for more than two years.
The comments follow a Treasury Committee evidence session in November last year, and consequent letters between the two parties, which saw the ombudsman defend the increase of its compensation limit from £150,000 to £350,000 in 2019.
Mr Stride said: "As the committee expressed in our recent evidence session, there are concerns about the Fos’ budget — it costs the Fos on average £960 to resolve a case, against the case fee of £650, and it is funding its expenditure through its reserves.
"The committee will want to explore these and other issues in detail around the time that the Fos publishes its final budget in the spring.
"We will be inviting Caroline Wayman and Baroness Manzoor, Fos chair, to provide evidence."
The issue of how the Fos is funded has been an issue for several years, with the service warning in 2017 that its operating model was unsustainable because it was so reliant on its reserves.
Mr Stride's comments followed a letter from Caroline Wayman, chief executive at the Fos, in which she said almost 80 per cent of cases over two years old were PPI cases relating to an "ongoing issue" with a single claims management company.
Ms Wayman said the cases had been impacted by an "unsuccessful legal challenge" by the CMC and the ombudsman expected to resolve the majority of cases by the end of this financial year.
In its plans and budget consultation for the coming year published in December the ombudsman predicted a cost base of £252.2m for 2021-22, a compulsory levy of between £84m - £106m and a voluntary levy of £1.1m.
The Fos also warned the complexity of its cases — and therefore how long they might take to process with an additional cost — was being driven by factors included "hard‑fought" fraud and scams and complaints about self‑invested personal pensions and the suitability of pension transfer advice.
The ombudsman said this included complaints linked to the British Steel Pension Scheme scandal which often involved significant sums of money.
In a letter to the Treasury Committee last week Ms Wayman said the ombudsman board had been clear it expected costs and efficiencies to "continue to be challenged and tested as part of the bottom-up budget process" and before the finalised budget in March 2021.
She said: "It agreed too that the current economic climate presented an unprecedented backdrop and that the consultation would need to reflect that and seek views on how best to balance the need to ensure financial stability with the need to respond to the broader economic and fiscal outlook and the impact on fee-payers.
"It agreed the service should, therefore, consult on a range of funding options and seek views on its reserves policy to inform a review during 2021-22."
Ms Wayman also said the Fos had appointed around 380 new investigators since April last year in a bid to meet growing case demand.
rachel.mortimer@ft.com
