Chair announces departure under Committee questioning
The chair of the UK’s Financial Ombudsman Service (FOS), Baroness Zahida Manzoor (pictured), has confirmed she will step down in August, just days after the unexpected resignation of chief executive Abby Thomas. This leadership shift has intensified uncertainty regarding the direction of the consumer-focused dispute resolution body.
Manzoor, who has served two three-year terms, announced her departure while addressing the Treasury Select Committee, stating that she would leave it to her successor to oversee the appointment of a new chief executive. The timing of her decision coincides with ongoing scrutiny of the financial redress system and increasing political pressure to balance consumer protection with business interests.
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The departure of Thomas, who had led the ombudsman since October 2022, was abrupt and came during a crucial review of how financial services handle consumer complaints. The government has been pushing regulators to ease burdens on businesses, a move that some believe conflicts with the FOS’s role in upholding consumer rights. According to one insider, Thomas faced board pressure to shift the organization’s stance, particularly regarding charging claims-management firms for bringing cases.
While Manzoor declined to elaborate on the reasons behind Thomas’s resignation, she maintained that the decision was reached through "mutual agreement", despite persistent questioning from MPs. The Treasury Select Committee may examine the circumstances of Thomas’s departure further, especially in light of ongoing legal proceedings related to motor finance mis-selling allegations.
Following Thomas’s exit, James Dipple-Johnstone, her deputy, has assumed the role of chief ombudsman on an interim basis, while Jenny Simmonds, the chief finance and risk officer, has been appointed interim chief executive.
The FOS has recently faced criticism from financial industry leaders, who argue that its compensation policies deter investment in the UK financial sector. Bank executives claim that a so-called “compensation culture” is making the UK less attractive to investors, with concerns that large-scale redress schemes could further destabilise the sector.
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James Daley, head of the consumer group Fairer Finance, suggested to the Financial Times that Thomas’s resignation could reflect deeper tensions within the regulatory framework. “It may well be that she is quitting in protest at the direction of travel. If so, that’s incredibly worrying and perhaps the strongest signal yet that the Treasury is serious about watering down consumer protections,” he said.
The Treasury has previously urged both the FOS and the Financial Conduct Authority (FCA) to reassess their approach to historical market practices and large-scale compensation claims. A consultation on proposed changes, including extending response times for financial firms and limiting avenues for appealing ombudsman decisions, concluded recently, with new regulations expected later this year.
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Industry groups, such as UK Finance and the Finance and Leasing Association, have voiced concerns that the current system introduces too much uncertainty, potentially discouraging investment in UK financial services. They argue that firms adhering to regulatory guidelines can still find themselves entangled in costly compensation claims, which they see as a barrier to economic growth.
What does the Ombudsman have to do with mortgages?
The Financial Ombudsman Service (FOS) does not directly regulate mortgages, but it plays a crucial role in handling disputes between consumers and mortgage lenders, brokers, and other financial service providers. Regulation of mortgages is primarily the responsibility of the Financial Conduct Authority (FCA), which sets the rules mortgage providers must follow. However, the FOS steps in when a customer has a complaint that has not been resolved by their mortgage provider.
How the FOS handles mortgage complaints
If a borrower has a problem with their mortgage - such as being mis-sold a mortgage, unfair charges, or issues with how their lender treats them - the FOS can investigate and decide whether the lender acted fairly.
The process typically works like this:
- Consumer complains to the lender – A borrower must first raise their issue directly with their mortgage provider and allow them up to eight weeks to respond.
- Escalation to the FOS – If the issue is not resolved satisfactorily, the consumer can bring their complaint to the FOS.
- Investigation & decision – The FOS will assess the case, consider relevant FCA rules, and decide whether the lender acted fairly. If the lender is found to be at fault, the FOS can order compensation, refunds, or corrective action.
Common mortgage complaints the FOS handles
- Mortgage mis-selling – If a lender or broker gave unsuitable advice, such as recommending an unaffordable mortgage.
- Unfair fees or charges – Issues with excessive fees, incorrect interest rates, or unfair penalties.
- Payment difficulties & repossession concerns – Complaints about how a lender handled financial difficulties or treated a borrower during repossession proceedings.
- Mistakes in mortgage administration – Errors in statements, miscalculations, or failure to apply agreed changes properly.
FOS vs. FCA: key differences
- The FCA sets the rules and regulations for mortgage lenders and brokers.
- The FOS resolves disputes and ensures consumers are treated fairly when things go wrong.
Photo: Chris McAndrew, CC BY 3.0 https://creativecommons.org/licenses/by/3.0, via Wikimedia Commons
