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The head of the UK’s Financial Ombudsman Service quit unexpectedly on Thursday in the middle of a major review of the consumer redress system in the financial services sector.
The departure of Abby Thomas, who has run the ombudsman since October 2022, comes as the government steps up pressure on all of Britain’s main regulators to ease the burden of rules on businesses in an effort to boost a flagging economy.
Thomas was under pressure to take a less consumer-friendly approach, according to one person familiar with the matter, who said the ombudsman’s board was frustrated at her initial reluctance to start charging claims-management companies for bringing cases.
The person also pointed out that the board was “less than fulsome in its praise” of Thomas, after its chair Baroness Zahida Manzoor said in a statement: “On behalf of the board and the executive, I would like to record our thanks and wish Abby every success in her future career.”
The ombudsman has attracted criticism from the City of London for awarding compensation to customers who say they have been mistreated by financial services groups, which industry executives says deters foreign investors from the sector.
Bank executives claim the UK’s “compensation culture” is one of the main factors deterring investors and weighing on financial services companies.
“Abby and the ombudsman have been under fire in recent months,” said James Daley, head of consumer group Fairer Finance.
“It may well be that she is quitting in protest at the direction of travel. If so, that’s incredibly worrying and perhaps the strongest signal yet that the Treasury is serious about watering down consumer protections.”
Thomas and the FOS were approached for comment.
Thomas has been replaced on an interim basis by her deputy James Dipple-Johnstone taking over the chief ombudsman role, with chief finance and risk officer Jenny Simmonds becoming chief executive.
Chancellor Rachel Reeves last year called on the FOS and the Financial Conduct Authority to improve how they handled “historic market practice and mass redress events” amid fears that banks might have to pay billions of pounds in redress over motor finance mis-selling allegations.
The outgoing chief executive had been due to appear before parliament’s Treasury select committee next Tuesday at a hearing on the motor finance crisis. But MPs said on Thursday they would instead question Dipple-Johnstone as well as Manzoor.
The committee said MPs “may choose to explore the circumstances” of her exit, as well as examining “to what extent the ongoing legal proceedings related to the motor financing sector and commissions has impacted the FOS”.
The FOS and FCA outlined potential changes to the financial redress system in November, including giving companies longer to respond to customer complaints and reducing the scope to appeal against ombudsman decisions. A consultation closed last Friday, with proposals expected in the first half of this year.
UK Finance, the main trade body for banks, said in its response that “it is clear this part of the regulatory system is not functioning as efficiently as it could, creating significant uncertainty in the framework and therefore acting as a drag on the investor appeal for UK financial services”.
The Financing and Leasing Association said in its response that “firms complying with FCA rules can still find themselves embroiled in mass redress events”, adding this caused “regulatory uncertainty”, introduced extra risk for market operators and harmed economic growth.
