LONDON (Reuters) - British members of parliament said on Friday that they doubt whether the Financial Ombudsman Service (FOS), which resolves disputes between financial firms and their customers, is ready for an increase in its remit proposed by the regulator.
The Treasury Committee said rushing through the proposed changes to the FOS, which are currently part of a Financial Conduct Authority (FCA) consultation, could further damage public trust in the service after it was criticised in a documentary aired earlier in the year.
The FCA's proposals would enable the FOS to adjudicate on disputes with an expanded number of small businesses, whose limited options for dispute resolution with lenders have been a point of contention after a series of banking scandals in the past decade.
"The committee is doubtful as to whether the FOS is ready for an increase in its remit within the FCA's timeline," said Treasury Committee chair Nicky Morgan in a statement.
"The proposals should not be pursued at the expense of sound decision making and appropriate training and recruitment at the FOS."
The FOS said earlier in July it was ready to broaden its remit.
Morgan's comments add to scepticism around the FCA's plans from groups representing small businesses, including those that were victims of bank misconduct, who have said the FOS is not well-suited to hear their complaints.
The committee became concerned about the FOS's services following a documentary that aired on Britain's Channel 4 in March. Its allegations included that FOS staff were ill-equipped to deal with complex cases and were more likely to find in favour of firms than customers.
An independent report commissioned by the FOS after the documentary did not support many of its allegations but said the FOS did face problems, including with funding.
"Our board has accepted the recommendations made in the independent review of our service. Some of these were already in train, and others we will begin work on shortly," a FOS spokeswoman said in a statement.
In June, Kevin Hollinrake, a lawmaker and chair of a group lobbying for improvements to business banking practices, proposed a bank-funded tribunal service be set up to help firms seek justice when mistreated, in addition to the FCA's proposed extension of the FOS.
(Reporting by Emma Rumney; Editing by Hugh Lawson)