Regulators feel the heat

The head of the Financial Ombudsman Service (FOS) has quit, as the UK regulatory landscape undergoes a reshaping following government demands for a more competitive approach.  Abby Thomas, who joined FOS in October 2022 as Chief Executive and Chief Ombudsman, is stepping down with immediate effect.

Interim arrangements will apply with the Deputy Chief Ombudsman, James Dipple-Johnstone, covering the Chief Ombudsman role and the Chief Finance and Risk Officer, Jenny Simmonds, covering the Chief Executive role.

Thomas’ departure follows that of Marcus Bokkerink, former chair of the Competition and Markets Authority (CMA) who left the role last month just two years after being appointed. Most CMA chairs are expected to serve for up to five years.

The Department for Business and Trade has appointed former Amazon UK boss Doug Gurr as CMA chair in the interim “in a bid to boost growth and support the economy”, saying the move  “comes off the back of a meeting of the country’s leading regulators with the Business Secretary and the Chancellor, who were asked to tear down the barriers hindering business and refocus their efforts on promoting growth.”

“As we’ve set out, we want to see regulators including the CMA supercharging the economy with pro-business decisions that will drive prosperity and growth, putting more money in people’s pockets.” 

Charging CMCs

There had been speculation that Thomas’ decision to go was prompted in part by her opposition to charging third party firms for bringing case to the Ombudsman.

In the immediate aftermath, FOS put out an announcement confirming plans to proceed with a proposal to charge professional representatives £250 to refer a case from 1 April 2025. They will receive £175 back if the case outcome is in favour of the consumer.

Professional representatives will be able to bring ten cases to the service for free each financial year. After that, every subsequent case they refer will be chargeable. FOS will remain free to all those who bring their cases directly, as well as to families and friends, charities, and voluntary organisations who may be helping them.

“Currently there is little commercial incentive for representatives to ensure the complaints they bring are well-founded or have merit. As a not-for-profit service, we expend our finite resources handling thousands of withdrawn or abandoned cases, which can lead to longer wait times for other customers.

The charges we are introducing from April will bring better balance to our fee model, helping us to resolve disputes quickly and ensuring a wider contribution towards our running costs.”

Currently financial service firms pay a £650 case fee for complaints against them that FOS investigates, while professional representatives do not pay a case fee.

Under the new rules, if a complaint referred by a professional representative is not upheld or is withdrawn, the financial business against whom the complaint was made will pay a reduced case fee of £475, instead of £650.

FOS said that between April and December 2024, around 47% of complaints submitted were from professional representatives, and its data shows a growing volume of complaints relating to motor finance brought by CMCs. However, only 26% of cases brought by professional representatives were found in favour of the consumer, compared to 38% of those brought directly by consumers for free.

“The introduction of charging is a most important step forward. CMCs are major businesses that should not have a free ride, not least because they have driven a compensation culture that damages investor confidence in the UK and threatens growth.  However, today’s decision on the level of the charge is unsatisfactory and we will continue to call for it to be increased.

 “Professional representatives should be charged on the same basis as lender firms to deliver a fair and equitable approach. And the suggestion that lenders must pay the lion’s-share of the case fee (£475) even when they are not at fault runs counter to FOS’s aim of applying a ‘polluter pays’ principle. We know of no other example where the loser in a case involving two businesses pays less than the winner.”

FCA in MPs’ sights

Meanwhile, the Financial Conduct Authority (FCA) remains under fire for its failure to tackle deep-seated concerns around its effectiveness. The All Party Parliamentary Group (APPG) on Investment Fraud & Fairer Financial Services has issued a supplementary to its report on the Financial Conduct Authority (FCA) published last November, which was based on evidence from more than 170 individuals including past and present FCA employees.

The initial report described the regulator as having “deep-rooted cultural problems”, and accused it of being “complacent, conflicted and captured” and “not fit for purpose”.

In a follow-up, Bob Blackman, co-chair of the APPG, took aim at what MPs saw as the “unconstructive” nature of the FCA’s responses to its findings, which he characterised as “disappointing, dismissive, and defensive”.  

He went on to state: “Sadly, our evidence-gathering has led us to the unavoidable conclusion that, based on all the testimony we have seen, there is still something seriously wrong with the FCA.

“The FCA has not substantively challenged the key points made beyond its nebulous claim that the issues raised are ‘largely historic’, something we unreservedly reject for the reasons already given.

“Therefore, we have no reason to soften our position, which is that there remains something seriously wrong with the regulator. It should also be recognised that many of these ‘historic’ issues raised in our original report have still not been resolved.

“The new testimony we have received since our report was published, including from previous employees of the FCA, has reaffirmed the validity of our view, leading us to conclude that the ‘incompetent at best, dishonest at worst’ narrative that was expressed in the first Report is still a valid perspective.”