There are mounting calls for the Financial Ombudsman Service to be more transparent and accountable amid controversy over its complaints backlog.

Last week, a report by the Institute for Economic Affairs branded the complaints body “unfit for purpose” and made a case for “major reforms”.

The Association for Mortgage Intermediaries agreed with many of the think tank’s findings and has also called for structural changes.

In December, FOS admitted to the Treasury select committee that it was dealing with a pipeline of more than 23,000 open cases that are more than two years old. Industry commentators have asked how the service will be able to clear this workload as well as the high case numbers resulting from the pandemic when it is also in consultation with staff about cutting 150 roles.

Earlier last month, FOS chief ombudsman and chief executive Caroline Wayman resigned after 22 years at the service. She did not attribute her decision to any of the criticisms levelled at the organisation, instead saying FOS was at a “pivotal point” and that it was the right time to step down.

Ami chief executive Robert Sinclair believes the management structure needs to change. He says: “We have already written to the chair of the ombudsman suggesting that they split the principal ombudsman role from the chief executive role.

“The principal ombudsman would then be much more able to deal impartially with complaints from a consumer and firms’ perspective.

“The chief executive would be able to look after the pay and rations of the organisation and therefore be much more accountable to the people who pay for it for the way that it is working operationally.

“Certainly from reading the IEA’s report, the idea that FOS should make its policies and processes more transparent, is something that we would undoubtedly welcome.

“The ombudsman should not be frightened of allowing firms to see how they are being judged because that transparency would help everybody to move forwards.”

Sinclair says that he was asking for information on the extent and nature of the complaints backlog for seven or eight months, but was told by the FOS that the only details available were already in the public domain. He says it was only when Treasury select committee chair Mel Stride demanded the same information more detail was provided.

But Sinclair says: “We still don’t know which sectors those cases relate to or have more accurate time bandings. We only know that they are more than two years old, but that could mean two years and a day or much old.”

Both Sinclair and the IEA have questioned whether the FOS has the resources to deal with the volume and complexity of cases that now fall within its remit, particularly since the maximum award was raised to £350,000 and small businesses can now also bring complaints as well as consumers.

Building Societies Association head of legal Elaine Morton agrees that there are issues that need to be looked at. She says: “Twenty years on from the legislation which set up the FOS it’s time to re-examine how it functions.

“Transparency, a proper appeal mechanism and thorough consideration of whether it should be subject to regulatory principles are essential given the quasi-regulatory effect of its rulings.”

TED Mortgages director Tom Brennan says: “Having personally dealt with FOS for a complaint I raised about a bank, I can vehemently state that the whole system needs overhauling. It can often take around six month for your complaint to be picked up by a case handler and then further months for it to finally be resolved. Communication is slow and often convoluted and the methods of investigation are not well thought out. I’m experienced in financial services and even I struggled getting my complaint properly heard. Had I just accepted the original findings then I would not have had my complaint upheld, but knowing I was right I pursued it eventually found in my favour. It concerns me to think how many people have just accepted the outcome that’s been given to them.”

But Bespoke Finance director Adam Hosker says that, while some of the findings from the IEA’s report may be valid, the FOS still provides a confidence-boosting backstop for consumers and protects the sector from facing trivial complaints through the courts.

He says: “If the time comes when we are subject to a complaint, I would take a tribunal process over the courts any day.”

A FOS spokesperson says: “Since the Financial Ombudsman Service was set up we have helped millions of consumers resolve their problems with financial businesses.

“In 2020/21, excluding PPI, we received around 50 per cent more cases than we expected to and are currently helping thousands of people with complaints, including many who have seen their lives or businesses impacted by Covid-19.

“We have recruited new staff to help us significantly reduce waiting times for customers and ensure we continue to provide an effective service.

“Transparency is an important principle for the ombudsman service and we share a wide range of information on our website, in our formal publications and in response to a large number of individual requests.”