Plans to downgrade the role of the Financial Ombudsman Service (FOS) in the proposed enhancing financial services bill reflect pure interest-group lobbying by the finance industry, according to Iain Ramsay, emeritus professor of law at the University of Kent.
In a letter to the Guardian, Ramsay highlighted that the king's speech, which outlined the government's legislative agenda for the next 12 months, gave little coverage to this bill. The central part of the proposals, cloaked in the guise of "modernisation," would significantly reduce the FOS's authority.
Ramsay argued that the finance industry already exercises substantial influence on policy and has a strong incentive to participate in the policy process, as the costs of consumer redress may be concentrated in a few large firms. In contrast, consumers of financial products have diffuse concerns, more limited expertise, and face high organisational costs.
He expressed concern that the Treasury seemed to accept without question industry claims concerning the FOS, making little attempt to assess reviews of its work or explore its role in the financial regulatory system. Independent empirical and social science evidence should have played a key role in assessing reform proposals, but this did not occur.
Ramsay concluded that the policy outcome is likely to be at best an exercise in accidental wisdom, warning that the reforms could negatively affect consumers.
