Financial Ombudsman Service: Is the Watchdog Itself Under Investigation?

For years, consumers have been told that the Financial Ombudsman Service (FOS) is the independent, trustworthy referee standing between ordinary people and powerful financial institutions. It’s sold as the place of last resort, the body you turn to when a bank, lender or finance company has failed you.

But what if the referee isn’t just missing obvious fouls, what if the whole match is being run on a pitch tilted against consumers?

In light of mounting evidence, historic investigations and recent parliamentary criticism, it’s no wonder many people now ask whether FOS is truly fit for purpose or whether something far more troubling is going on behind the scenes.

The Dispatches Investigation That Shattered the Illusion

The glossy PR image of FOS took a huge hit back in 2018 when Channel 4’s Dispatches sent an undercover reporter into the organisation. The footage painted a bleak picture:

• Staff admitting they didn’t properly understand the financial products they were deciding on
• Case handlers under pressure to reject complaints or “go with the lender”
• Serious concerns that consumers were being let down by a culture that prioritised speed and numbers over fairness

The scandal was so serious that FOS’ board commissioned an “Independent Review”, led by Richard Lloyd who was paid by the FOS for carrying out the review! That review accepted that many staff were not equipped to deal with complaints and highlighted issues with training, quality control and case handling.

At the same time, the Treasury Select Committee and industry bodies demanded answers, and FOS was forced to launch an internal and independent review into standards, alleged bias and training failures.

In other words, this wasn’t a “one-off bad day at the office”. It was symptomatic of deeper systemic structural problems.

Seven Years On: Has Anything Really Changed?

Fast-forward to 2024–25 and the questions haven’t gone away. If anything, they’ve intensified.

Parliament’s Treasury Committee recently scrutinised FOS over the abrupt departure of its Chief Executive and Chief Ombudsman, Abby Thomas. MPs accused the FOS Chair, Baroness Manzoor, of “disrespectful” obstruction after she initially tried to present the exit as a “mutual agreement”, only for documents to reveal it stemmed from a complete collapse in confidence between the board and its CEO.

What is clear is that Abby Thomas was clearly focused on consumer rights and representation, which makes her departure all the more damning of the under-fire organisation.

When the very organisation that’s supposed to provide transparency and fairness in financial disputes is itself criticised by MPs for a lack of transparency and obstructive behaviour, it sends a clear warning to the public?

At the same time, the UK Treasury has launched a review of FOS, amid concerns from industry that it has been acting as a “quasi-regulator” and applying today’s standards to past conduct – while consumer groups argue that even now, FOS is still failing too many people and getting far too much wrong.

Alongside this, campaigners and consumer advocates have been compiling dossiers of systemic failures: mishandled complaints, bias towards firms, and repeated examples of consumers being left high and dry by decisions that simply don’t stack up against the evidence.

Maladministration – Not Just “Human Error”

Let’s be clear: any large body will make mistakes. But the picture that has emerged around FOS goes far beyond the odd administrative slip.

The Independent Review following Dispatches found:

• Staff not properly trained for the cases they investigate
• Weaknesses in quality assurance and oversight
• Inadequate handling of certain types of complaints – the very matters where consumers most need protection

Meanwhile, FOS’ own recent data shows it received over 300,000 new complaints in 2024/25, the highest level in six years, and yet it only upheld around 34% in favour of consumers.

When you combine:

• Historical evidence of poor training and flawed case handling
• Ongoing stories of consumers being fobbed off
• Parliamentary criticism of FOS’s leadership and accountability

…it becomes increasingly difficult to write this off as accidental or isolated. Many would call that systemic maladministration, poor leadership and under qualified staff.

Corruption and Collusion: Rumours That Won’t Go Away

For years, frustrated consumers and campaigners have whispered – and sometimes shouted – about corruption and collusion within FOS.

These words seem very strong, but look at the pattern:

• Undercover footage suggesting staff were nudged towards siding with banks and lenders
• MPs condemning FOS’ leadership for obstructing scrutiny over its own governance and leadership crisis
• Long-running complaints from consumers who feel the Ombudsman has simply rubber-stamped the firm’s position, even where evidence clearly supports the consumer

In that context, it’s not hard to see why rumours of corruption and collusion persist, and why many ordinary people feel those rumours might not be entirely fanciful. When a dispute-resolution body repeatedly behaves in ways that look biased, opaque or self-protective, public trust doesn’t just erode; it collapses.

Lifting the Lid: Our Freedom of Information Request

The Freedom of Information Act 2000 applies to FOS, and anyone can request recorded information about how it operates. FOS even publishes FOI guidance and statistics acknowledging its obligations and the need to improve timeliness and compliance.

There have also been ICO decision notices examining how FOS handles FOI requests, including instances where the Ombudsman’s reliance on cost-limit exemptions has been scrutinised.

Given the scale of concerns, we have now submitted a detailed Freedom of Information request to FOS. Our aim is simple:

• To obtain hard data on case outcomes, staff training, internal guidance and potential conflicts of interest
• To understand whether incentives are offered to reject complaints
• To shine a light on whether staff are targeted on closing complaints within set timescales

If FOS truly has nothing to hide, it should welcome the opportunity to demonstrate that its processes are robust, fair and transparent. If, on the other hand, we encounter resistance, delay, or evasive responses, that will speak volumes.

Why Consumers Should Think Very Carefully Before Trusting FOS

FOS likes to present itself as a free, fair and independent alternative to the courts. In theory, that’s exactly what consumers need.

But when you put the pieces together – the Dispatches revelations, the Independent Review’s findings, parliamentary criticism of its leadership, and the ongoing questions about culture, governance and transparency – it becomes increasingly difficult to justify any faith in this organisation.

The service as it stands is causing more consumer harm than good, and it is little surprise that consumers and consumer representatives are now looking to the courts for justice rather than the Ombudsman

We will continue to investigate FOS, pursue answers through Freedom of Information requests, and shine a light on behaviour that undermines consumers’ rights.

Until FOS demonstrates, with evidence, that it is truly independent, transparent and accountable, consumers are right to question and withhold their trust.