Failures at the Financial Ombudsman Service

Undercover investigations can be rather a blunt way of exposing a problem. In a big organisation, one undercover reporter is unlikely to be able to show the full picture.

And what makes it into the edit is only a fraction of the footage that is taken - with plenty of examples of good practice that end up on the cutting room floor.

Nevertheless, whichever way you look at it, last night's Dispatches documentary on Channel 4 exposed some worrying practices at the Financial Ombudsman Service.

The toxic combination

The film highlighted that rising case loads have left some Ombudsman staff with unrealistic levels of work - sometimes leading to rushed decisions. It also suggested that when you're in a hurry, it's easier to settle in the bank or insurer's favour than it is in the customer's.

This combined with a lack of adequate training for some staff creates something of a toxic combination. 

Even before this documentary was conceived, I'd heard first hand from Ombudsman staff and former staff about the rising pressures at the Ombudsman. I'd also heard some talk disparagingly about the move away from specialisation - to a world where caseworkers are jacks of all trades, master of none.

In last night's programme, one worker is caught on camera saying that she sometimes hasn't even heard of the products that are involved in a case she's working on - and has to google them.

In some other footage, a worker talks about playing the "D&O game" - plucking the suggested amounts for distress and inconvenience payments out of the air rather than using a formula to calculate them objectively.

Time for contrition

The response from the Ombudsman in the programme seemed reasonable. It talked about not being representative of them at their best - and reiterated their commitment to doing the right thing by both their staff, the industry and their customers. Yet the statement that sits on the Ombudsman's website is not nearly as contrite.

It says that the programme is "unfair", and only in the third paragraph does it concede that there may be some lessons to be learned.

That sets the alarm bells ringing for me. I don't think the allegations in the Dispatches documentary can simply be swatted away. And I can't help being struck by the irony that the Ombudsman - the independent arbiter of what is fair and reasonable - claims the investigation is "unfair", without explaining why. 

The non-executive board of the Ombudsman has launched its own inquiry into the allegations, but this is not the right body to investigate. If these failings are substantiated, then the board itself is at fault.

The board of the Financial Ombudsman Service are extremely experienced non-execs, who are well paid - between £25,000 and £75,000 a year. These failings happened on their  watch - so it can't be right that they are left to scrutinise them.

An external inquiry

I think we now need an independent external investigation to be clear about how far the rot in the Ombudsman reaches. The true picture may well not be as bad as Dispatches makes out. But the public need to know that for sure. 

I've always had an enormous amount of respect for the work of the Ombudsman. It's an incredibly important body that has a crucial role in keeping the balance between consumers and the financial services industry.

But if it is captive to the industry - even slightly - then it is failing in the mandate set for it by Parliament. The same is true if it is underresourced and failing to meet the high standards that we all should be able to expect of it.

If we can't trust the Financial Ombudsman Service, then trust in the whole industry - already at a low ebb - will collapse.

Rushanara Ali MP suggested that she would like to see the Ombudsman subject to another Treasury Select Committee inquiry. But I wonder whether the Treasury itself should not be taking the lead on conducting its own full root and branch review.

These doubts need to be cleaned away - by demonstrating that clear action has been taken to address the problems identified. That may include one or more individuals taking personal accountability for this. 

For now, the reputation of the Ombudsman as the arbiter over what is fair and reasonable, is tarnished. That needs to be set right as soon as possible.