The Financial Ombudsman Service has announced new measures in the next step in a series of reforms to streamline and modernise the complaints process.
Following a joint consultation with the FCA, FOS will introduce changes to its operations including a new registration stage to ensure cases are within scope and ready to be investigated, and new powers to dismiss complaints.
Complaints can be dismissed 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 1st October 2026 and FOS says the change will allow it to "focus our resources on the cases we were originally set up to resolve".
A new registration stage will be rolled out next year, following a consultation on differential case fees later this year, to ensure that complaints referred to its service are within scope and ready to be investigated before being allocated to a caseworker. "This will continue our work on providing a fairer funding model to better reflect costs and support earlier resolution of disputes", the Ombudsman says.
A further amendment aims to provide greater clarity that FOS's decisions are "based on the standards applicable at the time of the act or omission complained about – and will not be applied retrospectively". This provides a foundation for proposed legislative changes to the ‘fair and reasonable’ remit which are currently progressing through Parliament.
The measures are part of a wider package of reforms to the redress system – including legislative changes.
These include an updated memorandum of understanding with the FCA to ensure its decisions are aligned with regulatory rules, charges for professional representatives to refer cases to ensure costs are fairer and cases are better evidenced, and changes to the interest rate applied to some of the awards it makes to "better reflect present economic conditions".
James Dipple-Johnstone, chief ombudsman at the Financial Ombudsman Service, said: "We are driving forward reforms to bring consistency and predictability to the redress system – helping to underpin confidence in financial services, ensuring major or emerging issues are escalated earlier, and supporting firms with better insight to help them address and resolve customer issues more effectively and proactively.
"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."
Ash Daniells, legal director at Kennedys, commented: "One of the most interesting changes is the ability of FOS to dismiss a claim if they consider the compensation sought “significantly” exceeds the award limit. This is included as a non-exhaustive example of when FOS may dismiss a complaint and so, unsurprisingly has not made headlines. Despite this, it could have a big impact moving forward.
"I appreciate the logic behind the decision – that FOS should not be a testing ground for the merits of a claim, before moving onto civil proceedings. However, FOS provides an accessible alternative to expensive and drawn-out litigation and it is unfair to take that right away. Many consumers prefer to pursue larger complaints via FOS given the historically ‘consumer friendly’ approach taken, as well as the ability to rely on limitation arguments that simply would not stand up in Court.”
