The Financial Ombudsman Service acts as a “quasi-regulator” and is a barrier to the government’s growth agenda, according to Rosemount Financial Solutions chief executive Ahmed Bawa.  

Bawa has written to Economic Secretary to the Treasury Emma Reynolds, who is about to begin a review into the effectiveness of the financial complaint’s regulator, to express his concerns. 

In the letter, dated 28 April, Bawa said the FOS supports a “growing complaints industry and culture within UK Financial services,” which flies against the new growth agenda at the Financial Conduct Authority and Chancellor Rachel Reeves. 

He added that the FOS “operates as a quasi-regulator, which won’t promote confidence or support growth in our industry.” 

The letter comes after a Treasury policy paper called ‘New approach to ensure regulators and regulation support growth’ on 31 March, which said “the current regulatory landscape is not functioning as effectively as it should”. 

The Treasury said Reynolds will examine whether the FOS “is delivering its role as a simple, impartial dispute resolution service which quickly and effectively deals with complaints against financial services firms and which works in concert with our Financial Conduct Authority which regulates the sector”. 

The Treasury says Reynolds will look at three key issues:

• The framework in which the FOS operates which has resulted in it acting, at times, as a quasi-regulator 

• Whether the FOS is applying today’s standards to actions that have taken place in the past 

• The practices that have grown up over time on compensation 

Bawa said, “we strongly believe each point is a real area of concern”. 

He argued that “claims management companies know how to present cases to the FOS, using the right words and phrases to receive compensation, whether there is a legitimate complaint or not”.   

The financial planning network chief added that a complaints culture has grown since the payment protection insurance scandal, which ran for over two decades from the late 1990s, and still exists in the FOS today. 

Bawa said: “The FOS effectively acts as a cashpoint mechanism, transferring money from advice firms to claims management companies.” 

He added that unless changes are made at the watchdog “it will be the FOS – not the Financial Conduct Authority – that will be the most significant regulatory barrier that firms will have to jump”. 

The FOS has recently undergone a change of leadership when chief executive and chief ombudsman Abby Thomas resigned suddenly in February. 

Her roles are currently being filled by interim chief executive Jenny Simmonds and interim chief ombudsman James Dipple-Johnstone. 

Also, in February, the watchdog said that City firms who have customer complaints against them rejected will get a rebate of more than 25%, while claims management companies will be charged for the first time to bring cases to the regulator. 

Labour has vowed to cut red tape for firms after the Chancellor said in November that regulations put in place to protect the economy following the global financial crisis had “gone too far” and hindered UK growth.