The government is consulting on reforming the Financial Ombudsman Service, saying that a “more proportionate approach” to redressing consumers is required to reduce costs for businesses.
In a speech at London’s Mansion House, Chancellor Rachel Reeves hinted at measures to deregulate the financial services sector, which has been subject to tighter rules after the global financial crisis.
In the mortgage sector, for example, the then-coalition government brought in mortgage stress tests, while financial institutions were required to hold more capital.
Reeves said: “The Financial Ombudsman Service framework will… be modernised so that it continues to play a vital role for consumers to get redress while giving clearer expectations around its decisions for consumers and for financial services firms.”
She added: “While it was right that successive governments made regulatory changes after the Global Financial Crisis, to ensure that regulation kept pace with the global economy of the time, it is important that we learn the lessons of the past.
“These changes have resulted in a system which sought to eliminate risk taking. That has gone too far and, in places, it has had unintended consequences which we must now address.”
The Ombdusman has previously sided with consumers on issues like the mis-selling of payment protection insurance (PPI) and car finance.
Rocio Concha, Which? director of policy and advocacy, raised concerns about the Ombdusman news.
She said: “Before the election, the government promised its approach to financial services would strengthen consumer protection, but launching a review of the Financial Ombudsman Service in response to lobbying by the industry threatens to do the opposite.
“While the financial sector is a vital part of the UK economy, consumers are being failed on a daily basis by irresponsible behaviour from some firms – from banks and payment providers that refuse to take fraud seriously, to insurers that put people through undue hardship when they make a claim.
“Effective redress and strong regulation are often the only protection they have and consumers will be rightly concerned to see plans to review their rights to complain to the Financial Ombudsman Service.
“For its financial regulation plans to succeed, the government must look beyond the boardrooms of the City of London and listen to millions of consumers who have been struggling through a painful cost of living crisis. The Chancellor must ensure they are not further exposed to poor treatment at the hands of the financial sector.”
