The dismissal of the former financial ombudsman from her post was the result of a “collapse in confidence” driven by “fundamental disagreements” over strategy and operations, MPs have said.
The collapse “covered a broad range of issues and was not driven by a single event or topic”, according to a report by the Treasury select committee.This “led the board to dismiss Abby Thomas”.
The Financial Ombudsman Service (FOS) plays a key role in resolving complaints by consumers against banks and other financial groups about unfair treatment or poor service. The Treasury is currently reviewing the remit of the body.
The disarray at FOS came as it handles record numbers of complaints about financial products in 2024/25, which was the highest number in six years.
Thomas’s ousting sparked a row in which Baroness Manzoor, the departing chair of the service, has been accused by MPs of a “disrespectful” refusal to answer questions and account for the circumstances of the rift with its former chief executive.
The peer declined to explain why Thomas had suddenly left the FOS and whether any severance package was agreed.
Manzoor said only that the move had been a “mutual agreement”.
In a letter to MPs in February, Manzoor insisted “as a member of the House of Lords, I cannot be required either to attend before the committee, or to answer its questions”, the report said.
MPs said while Manzoor was correct – because Commons committees have no power to compel the Lords – “it was unnecessary and disrespectful”.
The Treasury select committee ordered the FOS to submit details of any severance deal or financial package and any confidentiality or non-disclosure agreement negotiated between it and Thomas.
The service provided the details but the committee has still to publish them, saying the decision not to do so reflects “our awareness of the need to balance transparency against fairness to individuals”.
The Treasury committee chairwoman, Dame Meg Hillier, said the FOS’s failure to block scrutiny by MP’s should send a “clear message” to others seeking to frustrate the process.
“The handling of this situation by the senior leadership of the Financial Ombudsman Service has been deeply disappointing,” she said. “I hope this sends a clear message … that MPs will have answers to the questions they ask… whether officials attempt to block them or not.”
Manzoor said she was committed to providing open and transparent evidence to MPs but said there are “rare instances when that can be difficult – particularly when it relates to employment matters”.
UK Finance last week backed calls that the Financial Ombudsman Service should be stopped from acting as a “quasi-regulator” and called for a timetable of reform for the body.
The move came in the finance body’s submission to the government ahead of the Chancellor Rachel Reeves’ Mansion House speech this week and the Treasury’s Financial Services Growth and Competitiveness Strategy paper.
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