The Treasury Select Committee has criticised the Financial Ombudsman Service for the way in which the departure of its former Chief Ombudsman and CEO Abby Thomas was handled.

The approach of senior leadership at the Ombudsman to her departure in March was, “disrespectful and deeply disappointing”, according to a report published this morning by the Committee.

Ms Thomas exited the Financial Ombudsman Service in a shock departure amid reports of a disagreement over planned fees to be charged to claims management companies.

At the time of her departure the FOS declined to comment beyond its statement confirming that she had left.

Ms Thomas left the Financial Ombudsman on 4 March. Her salary for 2024/25 included leaving payments totalling £229,869 which comprised £100,000 for loss of office, £107,692 pay in lieu of notice and £22,177 for a period of gardening leave which commenced on 6 February, according to the latest FOS Annual Report.

The Treasury Select Committee produced today's report in response to an interview with the Ombudsman’s chair Baroness Manzoor and interim Chief Ombudsman James Dipple-Johnstone in February where they discussed Ms Thomas’ sudden departure.

The report found that Ms Thomas was dismissed from the Ombudsman due to a, “mutual collapse in confidence” and “fundamental disagreements” on how the Ombudsman should be run.

It criticised the handling of the situation by Baroness Manzoor as “disrespectful” when she refused to answer questions from the committee which was investigating Ms Thomas’ exit, citing her position as a member of the House of Lords.

The Committee report said: “Although this argument was strictly true, because House of Commons Committees have no powers of compulsion in relation to Members of the House of Lords (and vice versa), it was unnecessary and disrespectful.”

The group of MPs said that when questioned Baroness Manzoor declined to answer the questions put to her, citing concerns around employee well-being.

The Committee added that Baroness Manzoor, “was also unwilling to disclose when the departure of Abby Thomas was agreed, whether Ms Thomas had received a severance payment and whether the former CEO had performed effectively in her role.”

Ms Thomas, an expert in customer service in the mobile phone sector, took up the role in October 2022 from Nausicaa Delfas who was seconded to the FOS from the FCA.

Baroness Manzoor is to step down as chair of the FOS board at the end of her term on 1 August.

The Treasury Select Committee, made up of MPs, holds government ministers and senior officials to account and regularly questions FCA and Bank of England senior figures.