FOS announces reforms to complaints process

The Financial Ombudsman Service (FOS) has announced a series of reforms designed to streamline and modernise the complaints process, which include clarification that decisions will be based on the standards prevailing at the time of the complaint, rather than applied retrospectively.

The FOS has faced criticism from auto finance lenders over its previous willingness to consider retrospective motor finance complaints regarding discretionary commission arrangements (DCAs) on agreements dating back to April 2007, including the period before the Financial Conduct Authority (FCA) ban on DCAs in 2021.

Announcing its reforms, which follow a consultation with the FCA, the FOS said amending the rules to make it clear that decisions are based on the standards applicable at the time of the act or omission complained about provides a foundation for proposed legislative changes to the ‘fair and reasonable’ remit which are currently progressing through Parliament.

FOS will also have new powers to dismiss complaints that are not appropriate for the Financial Ombudsman and may be better resolved – or are already being investigated – in other ways.

These include complaints that may be better suited to court, law enforcement, or another dispute resolution process, or where there has been no financial loss, or material distress or inconvenience. These will come into effect on 1 October 2026.

In addition, FOS will rollout a new registration stage next year, following a consultation on differential case fees later this year, to ensure that complaints referred to the service are within scope and ready to be investigated before being allocated to a caseworker.

Later this year, FOS will publish the first of its joint thematic reviews with the FCA to provide more insight on the types of complaints it sees and its approach to resolving them.

James Dipple-Johnstone, Chief Ombudsman at the Financial Ombudsman Service, said:

“This is an important part of the wider package of reforms, and we will continue to work closely with the government, the FCA, consumer groups and industry stakeholders on this significant transformation of the redress system and the way our service operates within it.”

Legislative changes, to the way the redress system and the Financial Ombudsman Service operate, are progressing through Parliament in the Financial Services and Markets Bill.

The Finance & Leasing Association (FLA), which has consistently called for reforms that improve certainty, consistency and accountability within the UK’s financial services redress framework, said it welcomed the new FOS measures.

The FLA has long called for reforms in this area and will continue to work with the Financial Ombudsman Service to support their implementation. We also look forward to further reforms that improve confidence, transparency and certainty across the wider redress framework.”

Read FOS’s policy statement on Modernising the Redress System