Insights ¦ Review of the Financial Ombudsman Service

Key Take Aways

1. The UK government has launched a comprehensive review of the Financial Ombudsman Service (FOS), aiming to enhance its simplicity, impartiality, and effectiveness in dispute resolution.
2. The review seeks to address concerns of regulatory inconsistency where FOS decisions have, at times, acted in a quasi-regulatory capacity, creating uncertainty for firms.
3. A key recommendation is to adapt the ‘Fair and Reasonable’ test, aligning it with FCA rules to ensure decisions are consistent with high standards of conduct.
4. The proposed reforms include establishing formal mechanisms for the FOS to seek the FCA’s interpretation on FCA rules and wider implications, improving regulatory coherence.
5. There is a strong emphasis on clarifying the roles of the FCA and the FOS, especially regarding mass redress events and larger implications issues, to prevent overlapping responsibilities.
6. The government plans to designate the Chief Ombudsman as the ultimate authority for FOS determinations, promoting consistency across decisions.
7. Transparency measures are under consideration, including publication of thematic guidance documents and improved communication on case handling standards.
8. Institutional arrangements are being evaluated, with consideration given to making the FOS a subsidiary of the FCA to foster better collaboration; however, risks to independence are recognised.
9. Tightening time limits for complaint submissions is proposed, with an absolute cap of 10 years from the event date to bring a claim, balanced by FCA exceptions for certain long-term products.
10. The legislative framework for mass redress events is proposed to be strengthened, enabling quicker investigations and interventions without the current delays caused by complex criteria.
11. The FCA’s powers to introduce industry-wide redress schemes and respond to mass redress events are to be expanded, incorporating simplified criteria.
12. The consultation process invites stakeholders to contribute their views on the proposed reforms, with a focus on operational clarity and ensuring the FOS remains true to its core mission.

Key Statistics

• The consultation period spans 12 weeks, closing on 8 October 2025.
• The FOS currently makes over 20,000 decisions annually, highlighting the scale of its operations.
• The proposed absolute time limit for complaints to be brought to the FOS is set at 10 years from the event date.
• The government intends to legislate for a 30-day response window when the FOS seeks an FCA view on rule interpretation.
• The consultation invites responses via email: FOS.Review@HMTreasury.gov.uk or by post to HM Treasury, 1 Horse Guards Road.

Key Discussion Points

• How to ensure that FOS decisions remain consistent with FCA standards, reducing regulatory uncertainty.
• The implications of formalising the FCA’s role in interpreting and providing views on rules during complaint resolution.
• The potential benefits and risks of making the FOS a subsidiary of the FCA, particularly regarding operational independence.
• The need for effective transparency, including thematic guidance publications, to help users understand case outcomes.
• Whether the current legislative framework sufficiently supports a more coherent and predictable dispute resolution environment.
• The justification for limiting complaint time limits to 10 years, with exceptions managed by the FCA.
• How to streamline the investigation process for Mass Redress Events, ensuring swift regulatory intervention.
• The appropriate scope of FCA powers to act quickly during emerging redress issues and minimise market disruption.
• Approaches to integrating firm-led redress schemes and regulatory responses under a unified framework.
• The importance of dedicated mechanisms for the FCA to intervene without procedural delays, especially concerning mass redress.
• Whether institutional reforms, including enhanced cooperation or structural changes, will materially increase the effectiveness of the redress system.
• The role of the court system in testing issues of law that arise during dispute resolution, and the suitability of avoiding appeals to courts.

Document Description

This article is a detailed government consultation on the future of the Financial Ombudsman Service (FOS). It outlines proposed reforms intended to improve the consistency, transparency, and operational effectiveness of the FOS as a dispute resolution body within the UK’s financial services sector. The document covers legislative changes, new procedural mechanisms for rule interpretation, mass redress event handling, and institutional arrangements, seeking stakeholder input on these critical reforms aimed at supporting a more coherent and predictable redress system.