The chief executive of the Financial Ombudsman Service (FOS), Abby Thomas, has stepped down, just months after Chancellor Rachel Reeves pledged to reform the organisation.
Ms Thomas, who took up the role in October 2022, had been under intense scrutiny for the FOS’s handling of the motor finance commission scandal, which has placed several major lenders at risk of billions of pounds in compensation claims. Her departure was announced on Thursday, just weeks before she was due to appear before the Treasury Committee of MPs.
FOS under fire over motor finance scandal
The FOS, a public body responsible for resolving disputes between consumers and financial firms, has been at the centre of controversy due to its stance on complaints regarding undisclosed commissions on motor finance deals.
Many finance firms have criticised the ombudsman service, accusing it of taking an overly consumer-friendly approach to these cases. The scandal has triggered widespread concern within the financial sector, with companies fearing significant compensation payouts.
Ms Thomas had been expected to provide evidence to the Treasury Committee later this month, but her resignation means that her deputy, James Dipple-Johnstone, will now appear in her place.
No explanation for resignation
The FOS has not given an official reason for Ms Thomas’s decision to leave. However, the timing of her departure has raised speculation that pressure from the government and the financial sector played a role.
In a statement, Ms Thomas said:
“It has been an absolute privilege to lead the Financial Ombudsman Service through this period of rapid transformation and innovation. I am immensely grateful to the entire ombudsman team for everything that they do to support our customers and build confidence in the financial services industry.”
In the interim, James Dipple-Johnstone will assume her chief ombudsman duties, while Jenny Simmonds, the FOS’s chief finance and risk officer, will act as chief executive until a permanent replacement is appointed.
Reeves pushes for reform
Ms Thomas’s resignation comes against the backdrop of calls for regulatory reform from Chancellor Rachel Reeves. In November, during her Mansion House speech, she stressed the need for the FOS to change, arguing that regulatory certainty was necessary to encourage investment and boost economic growth.
Speaking at the time, Ms Reeves said:
“The Financial Ombudsman Service plays a vital role for consumers to get redress when things have gone wrong, and that will not change. But reform is needed to create a surer climate for investment.”
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Her comments reflect a broader government effort to create a more business-friendly regulatory environment, particularly in light of concerns that excessive consumer protections could deter investment in the UK’s financial sector.
What’s next for the FOS?
With Mr Dipple-Johnstone set to appear before the Treasury Committee next Tuesday, attention will now turn to how the FOS intends to navigate the ongoing motor finance dispute and whether further leadership changes are on the horizon.
The hearing, originally scheduled for Ms Thomas, was expected to focus on the ombudsman’s handling of motor finance complaints. It remains unclear whether her departure will shift the committee’s approach to questioning the FOS leadership.
A regulatory shake-up?
The resignation of Ms Thomas has fuelled speculation that the government’s regulatory overhaul could extend beyond the FOS. The financial sector remains divided on the issue, with consumer groups warning that weakening consumer protections could lead to increased financial misconduct, while business leaders argue that greater regulatory certainty is needed.
As the Treasury Committee prepares to question the FOS’s interim leadership, it is clear that the future direction of financial regulation in the UK remains uncertain. Whether Ms Reeves’ reform agenda will bring the desired balance between consumer rights and financial sector stability remains to be seen.
