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Turmoil on the UK monetary ombudsman deepened on Tuesday after its chair referred to as for a “radical” shake-up of its guidelines and introduced plans to step down solely days after the surprising departure of its chief govt.
Baroness Zahida Manzoor, chair of the Financial Ombudsman Service (FOS), told parliament’s Treasury choose committee that the company was “actually not rudderless”, whilst she revealed plans to go away when her second three-year time period ends initially of August — and mentioned it could be as much as her successor to discover a new CEO.
Requested repeatedly by MPs why Abby Thomas unexpectedly quit as CEO and chief ombudsman final week, Baroness Manzoor refused to present particulars of what triggered the departure apart from to say there was “a mutual settlement” on Thomas’s determination to go away.
The upheaval underlines how the often low-key physique — which offers with shopper complaints towards the monetary sector — has come underneath scrutiny for its function within the multibillion-pound scandal over automotive loans amid fears it’s deterring traders within the UK.
Meg Hillier, chair of the Treasury choose committee, has sent letters to the ombudsman’s chair and to Monetary Conduct Authority chair Ashley Alder, asking for extra element on Thomas’s departure, and whether or not the previous CEO had acquired a severance fee. The ombudsman is unbiased however the FCA appoints its board and oversees its operations.
The service has been thrust into the highlight as prime minister Sir Keir Starmer steps up strain on UK regulators to ease the burden of forms in help of the federal government’s push to revive the stalling British financial system.
Executives within the Metropolis of London have criticised the ombudsman for taking a consumer-friendly strategy to compensation claims for alleged mis-selling of automotive finance — a scandal that HSBC analysts have estimated may find yourself costing banks £44bn.
Baroness Manzoor informed MPs that laws could also be wanted to make a number of the adjustments she believed have been crucial to repair flaws within the UK’s system for compensating prospects within the monetary sector.
“It relies upon how radical we need to be . . . however let’s do one thing radical guys, as a result of if we don’t — what’s the level?” she mentioned, including that the UK’s shopper credit score laws was “very sophisticated and outdated and I feel that’s one thing that parliament ought to have a look at”.
John Grady, a Labour MP on the committee, mentioned: “Is that this only a mess that we want begin once more on?”
He mentioned: “If I used to be an investor within the UK I’d say I don’t know the place to begin as a result of I’d nicely in good religion proceed in a sure method and discover myself going through huge claims sooner or later,” including that the method was additionally complicated for shoppers.
However shopper teams have defended the service, saying it supplies vital safety for shoppers towards abuse by monetary providers corporations. It guidelines on greater than 200,000 complaints a yr after they’re rejected by banks and different companies, and may award as much as £430,000 per declare.
The ombudsman launched a review of the redress course of with the FCA final yr — responding to a call by chancellor Rachel Reeves — and it is because of current preliminary proposals by June.
Baroness Manzoor referred to as for higher readability in UK shopper finance regulation. She mentioned companies typically complained the nation’s principle-based regulatory system triggered them “problem as a result of they don’t have readability — they’re searching for the tramlines” of what was allowed.
Defending the ombudsman’s decision to begin charging claims administration corporations that introduced nearly half of all complaints to the ombudsman final yr, Baroness Manzoor mentioned this was designed to enhance “equity” of its charging coverage.
It beforehand solely charged companies that have been the topic of complaints. However Baroness Manzoor mentioned that whereas some claims administration corporations “have superb behaviours, there are a lot of extra that sadly have very poor behaviours”, comparable to submitting poorly researched instances or overwhelming small companies with 1000’s of flaky claims.
One individual briefed on the matter mentioned Thomas’s departure stemmed from her reluctance to introduce prices for claims administration corporations. However the ombudsman’s chair informed MPs “the ultimate determination was unanimous”.
