Financial Ombudsman Service plans to review past decisions remain too process-driven despite an important change to how they will be judged says MP Nicky Morgan.
FOS is planning to review decisions made soon after it reorganised in 2016, and has provided details of its proposed methodology to the Treasury select committee.
It outlined a two-stage process, where Deloitte will review a sample of cases to see if they adhered to the required standards, before former Claims Management Regulator board member Carol Brady then looks at any cases that did not apply the right controls to see what the outcomes have been.
In October MPs on the Treasury select committee led by Morgan slammed FOS plans for how it will review past cases for evidence of poor decisions.
In previous correspondence Morgan criticised the plans for placing “too much emphasis on process” and raised concerns about the about the proposed ‘Wednesbury reasonable test’.
The test says a FOS decision would have to be considered irrational as well as unreasonable to be deemed wrong.
Morgan has objected to this proposal and said “this is an extremely high bar as decisions can be poor without necessarily being Wednesbury unreasonable”.
In correspondence published today, FOS chief executive Caroline Wayman has reconsidered using the ‘Wednesbury reasonable test’, and will use an alternative test, which is whether the outcome is safe.
Morgan has praised this change and says: “The FOS’ decision to change how the outcome of cases in the second stage of the review will be assessed is welcome. ‘Wednesbury reasonableness’ set the bar far too high for cases in the second stage.”
But she adds: “The review remains too process-driven and doesn’t focus enough on case outcomes. Only 150 cases, or 1.9 per cent, of the 8,000 cases from the relevant period will have their outcomes examined.
“It will be difficult, therefore, to conclude whether there were systematic issues with case outcomes if the sample in stage two is not significant in size.
“The committee will no doubt examine these issues in further detail when it takes evidence from the FOS once the case review is completed in the New Year.”