The FOS (Financial Ombudsman Service) plays a crucial role in the smooth running of the UK’s consumer-related financial service industry. Payday Loans Net shares eye opening findings from a recent investigation carried out about the FOS’s services. Find out how it can affect you.


In this article you’ll read:


  • Why Mr Lloyed carried out a review of the FOS
  • The findings of Mr Lloyd’s review into the FOS
  • Mr Lloyd’s recommendations for improving the FOS – organisational structure; staff training; funding
  • Why some people criticised the FOS review
  • Conclusion

In this article, we analyse the findings of the recent independent investigation into the FOS. The research was carried out by Richard Lloyd, a former Executive Director of the consumer watchdog ‘Which?’. We explain he instigated the review before looking at Mr Lloyd’s findings. Did he find evidence of systemic bias to the detriment of consumers? Which key areas did he suggest that there is room for improvement? Finally, was the scope of this review too narrow as some critics have complained?

Why Did Mr Lloyd review the Financial Ombudsman Service?

In March 2018, Channel 4 devoted a 30-minute episode of their ‘Dispatches’ documentary series to an investigation into the workings and decision-making processes of the FOS. The main points raised in the documentary were that:

  • FOS staff were insufficiently trained to cope with complicated cases, e.g. those concerning investments and pensions
  • FOS staff found it easier to find in favour of consumer finance firms because of pressure to meet work targets
  • The monetary awards for consumers suffering distress or inconvenience were inconsistent
  • FOS staff didn’t take consumer complaints about products like payday loans UK or credit cards seriously enough



As a direct result of these criticisms, Mr Lloyd was asked to carry out a review of the services offered by the FOS a month after the documentary was aired.

The Findings of Mr Lloyd’s Review into the FOS

The Financial Ombudsman Service review looked into four key areas: service quality, organisational issues, finances and governance.

Mr Lloyd said that the FOS staff of 3,500 broadly carry out their duties despite an increased workload as a direct result of PPI cases (due to continue until the August 2019 deadline.)

On the positive side, Mr Lloyd said that there was no evidence of systemic bias against consumers in the organisation as a whole. He couldn’t find any significant correlation between a reduction in pressure on the FOS workforce and their uphold rates. However, he felt that training was the key to ensuring individual staff members found no bias influencing their decision-making process.

He also made some other recommendations to improve the service offered by the Financial Ombudsman Service.

Mr Lloyd’s Recommendations for Improving the Financial Ombudsman Service

The FOS review consists of 53 pages. Here we have grouped his main recommendations into 3 main headings: organisation, staff training and funding.

  • Organisational Structure
  • In 2016 the FOS paid £10 million to the consultancy firm PwC to restructure their management programme. However, the feeling among the staff is that the present structure is more suitable for a sales workforce.

    Mr Lloyd’s review suggested that the organisational system of allocating cases to individual FOS staff members didn’t always have the best income. This is because staff then had to ask for specialised help for complex cases which slowed down a service which was already under the pressure of time constraints. He recommended that complicated cases should be given to specialised teams with experience, and all staff members should have a support network in place.


  • Staff Training

  • Mr Lloyd felt that the whole ethos of the organisation was geared towards efficiency. He thought that better staff training and incentives should be given to shift the focus to providing quality service and remove any traces of individual bias.

    He also said that clear communications were the main way to achieve their goals. A suggestion he made, was that policy and procedure guides should be updated for the benefit of the staff, and money should also be spent on communicating FOS aims to members of the public, so they were better-informed.

    He also recommended that the FOS should invest in better technology. This would be able to support the workforce and analyse the data better.

  • Funding the FOS
  • Mr Lloyd also stated that the present way of funding the FCA, and by extension, the FOS was insufficient. He advocated a new funding structure to pay for the latest developments and resources. At the moment, the Financial Ombudsman Service is funded by a combination of fees and levies. He suggested the imposition of a new levy structure. He added that firms’ contributions would depend on how risky they were to the consumer market.




Why Did Some People Criticise the FOS Review?

The main criticism of Mr Lloyd’s review of the FOS was that it only addressed the issues which had been raised by the Channel 4 documentary and was, therefore, ‘too narrow’.

Mr John Lamidey, co-founder of Money Cheats (a website supplying information about false and inflated claims for compensation), believes that a more comprehensive review of FOS is necessary. He highlighted the issue of Claims Management Companies which will come under the aegis of the FCA from April 2019. He believes that the behaviour of CMCs needs reviewing. New rules of conduct should be implemented beforehand because of the effect this will have on threats of litigation against the FOS and their overstretched resources.

The other issue missing from the review is what could happen if 160,000 SMEs, charities and Trusts also become the responsibility of the FOS. Considering this additional reason for an increased workload for the ombudsman in the future, some lawmakers advocate the creation of a new tribunal.

Financial Ombudsan Service Review – Conclusion

A further report on how far the recommendations for improving the FOS have been put into effect will be released by the end of 2019. It is of vital importance that the issues raised by the documentary and the resulting review lead to real change. The FOS play a crucial role in protecting consumers for short term loan direct lenders, as well as consumers for other financial services. However, they can only do their work if a commitment to improving their services leads to increased public confidence.



PUBLISHED BY
Chloe Winters
Chloe grew up in the countryside, but came to the city to pursue a career in economics. She fell in love with the abundance of shops, and quickly developed a passion for fashion. After blowing her first salary on a shopping spree, she realised that budgeting is the only way to go. Now, Chloe is a budgeting queen – and still manages to dress like a superstar. She loves sharing the advice and tips she gained along the way, and is excited to be part of the Payday Loans Net blogging team. Her advice to you: If I can do it, anyone can!

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