Insights ¦ Review of the Financial Ombudsman Service Consultation2

Key Take Aways

1. The UK government aims to preserve the FOS’s role as a simple, impartial dispute resolution body, but with enhanced regulatory coherence to prevent acting as a quasi-regulator.
2. The review concludes that a more formalised ‘Fair and Reasonable’ test will align FOS outcomes with FCA regulations, promoting consistency and predictability.
3. It is proposed that in cases where conduct is within FCA rules, compliance with those rules will automatically mean a firm has acted fairly and reasonably.
4. A formal mechanism will be implemented for the FOS to seek views from the FCA on FCA rule interpretations when ambiguity arises, enhancing regulatory collaboration.
5. The FOS will refer issues with wider implications or mass redress events to the FCA, which will be responsible for their regulatory response.
6. The government advocates for placing the authority for case determinations solely with the Chief Ombudsman to improve consistency.
7. The legislative absolute time limit for bringing complaints to the FOS is set at 10 years from the event or from the date of awareness, subject to FCA exceptions.
8. The review highlights the need for tailored handling of long-term product complaints, with the FCA authorised to extend time limits where justified.
9. For mass redress events, powers will be enhanced so the FCA can pausing complaint handling processes swiftly, with fewer procedural constraints.
10. The FCA will have greater flexibility to investigate and respond to redress events, including streamlining the process to declare and manage such events.
11. Proposals include enabling the FCA to direct the FOS to handle complaints in line with relevant redress schemes or pass complaints back to firms.
12. Stakeholders are invited to respond within 12 weeks, with the consultation focusing on aspects like the institutional structure, transparency, and operational reforms for the FOS.

Key Statistics

• The FOS publishes over 20,000 decisions annually.
• A proposed absolute time limit of 10 years will be introduced for behaviour complaints.
• The current EU Directive 2013/11/EU (ADR Regulations) no longer applies to the FOS from Spring 2026.
• The government proposes that complaints should be brought within six years of the event, or three years from the time the complainant reasonably recognised the cause.
• The consultation runs from 8 July 2025 to 8 October 2025.

Key Discussion Points

• The importance of maintaining a simple and impartial dispute resolution process that operates swiftly and effectively.
• The necessity of aligning FOS determinations with FCA rules to reduce regulatory uncertainty.
• The potential for the FOS to contribute to regulatory coherence without acting as a quasi-regulator.
• The implementation of formal mechanisms for requesting FCA views on rule interpretation.
• The strategic benefit of placing overall determination authority with the Chief Ombudsman.
• The importance of transparent guidance to stakeholders on likely redress outcomes.
• The implications of making the FOS a subsidiary of the FCA, including risks to independence and operational complexity.
• The proposed 10-year absolute time limit for complaints – whether this aligns with stakeholder expectations.
• The role of the FCA in investigating and managing mass redress events, including new powers to pause handling of complaints.
• The potential for streamlining redress schemes and improving responsiveness through legislative amendments.
• How to ensure the referral process for wider implications or mass redress is balanced, transparent, and efficient.
• The broader impact of institutional and process reforms on investment certainty, innovation, and consumer trust.

Document Description

This article summarises the UK government’s consultation on reforms to the dispute resolution framework overseen by the Financial Ombudsman Service (FOS). It details proposed legislative and operational changes aimed at enhancing regulatory coherence, reducing ambiguity, and reinforcing the FOS’s role as a quick, impartial mechanism for consumer redress. The article covers key themes such as the strengthening of the ‘Fair and Reasonable’ test, the establishment of FCA-FOS referral mechanisms, handling of mass redress events, legislative time limits, and potential institutional restructuring—seeking stakeholder input on a future-proofed approach for consumer disputes in financial services.