- Landmark reforms will return the Financial Ombudsman
Service to its original role as a fast, impartial complaints body
- Changes will improve consistency and alignment with the
Financial Conduct Authority, benefiting consumers and firms
- Legislation will deliver the most significant reform of the
FOS since it was established
The Financial Ombudsman Service (FOS) will undergo the most
significant package of reforms since its inception.
The government will today confirm it is set
to legislate to restore clarity to the financial services
redress system and provide greater certainty for consumers and
firms, ensuring the FOS is fit for the future.
The reforms will return the FOS to its original role as a simple,
impartial dispute resolution service that resolves complaints
quickly and effectively, while ensuring it operates within a
clearer and more predictable framework alongside the Financial
Conduct Authority (FCA).
The government is acting decisively to reform the redress system
to unlock investment, support innovation, and boost the
competitiveness of the UK financial services
sector.
The announcement comes as part of the government's response to a
public consultation held last year that sought views on how to
address concerns that, in a small but significant minority of
cases, the FOS has acted as a quasi-regulator. The government
heard through the review and consultation that this was creating
uncertainty for consumers and businesses that was holding back
investment.
Economic Secretary to the Treasury said:
“These reforms to the Financial Ombudsman Service will make
redress clearer, more consistent and easier to navigate.
“By setting clearer boundaries, we are restoring confidence in
the system and ensuring it works fairly and predictably for
consumers and businesses alike.”
Legislation will be brought forward when Parliamentary time
allows to reform the legislative framework that governs the FOS -
strengthening consistency in decision making, improving
regulatory coherence with the FCA, and providing greater
certainty for consumers and the financial services firms they
rely on. The government has confirmed it will legislate to:
-
Adapt the ‘Fair and Reasonable' test used
by the FOS to determine cases, setting out that where
firms have met their obligations under relevant FCA Rules, they
must be found to have acted fairly and reasonably by the
FOS.
-
Introduce a referral mechanism between the FOS and the
FCA to require the
FOS to seek a view from the FCA
where the FOS considers there may
be ambiguity in what FCA
rules require, or where it considers an issue
raised may have wider
implications across the financial
services industry.
-
Introduce an absolute time
limit of 10
years for bringing complaints
to the FOS, while giving the FCA the
ability to make exceptions to this time limit.
-
Make structural changes to the FOS to provide
greater consistency in decision making by
giving the Chief Ombudsman overall responsibility for FOS
determinations.
-
Make it easier for
firms and consumers to understand and learn from FOS
decisions by introducing a
requirement for the FOS and FCA to
publish regular thematic reports which provide useful
information and clarification on how the FOS will consider
certain types of complaint, including types of complaint
covered by FCA rules.
-
Ensuring the FCA, as
part of
its responsibility for
setting the regulatory response
to mass redress events, has
the tools it needs to
respond to these events quickly
and effectively, in the small number of
cases where such an intervention is appropriate.
The consultation response also confirms that the FOS will not be
made a subsidiary of the FCA.
Sarah Pritchard, Deputy Chief Executive at the FCA,
said:
“We want a system that delivers fair compensation fast, while
providing greater certainty to businesses so they have the
confidence to invest, grow and compete. We're acting at pace to
change what we can within our current powers, ahead of the
Government's wider reforms.”
James Dipple-Johnstone, Interim Chief Ombudsman at
the Financial Ombudsman Service, said:
“The financial sector has changed significantly since the
Financial Ombudsman was set up 25 years ago, which is why we
are driving forward changes to transform the redress system. We
are laying the foundations for an agile, responsive and
modern service which is fit for the future and has the confidence
of consumers and firms alike.”
The consultation, which ran for 12 weeks from July to October
2025, received hundreds of responses from a wide range of
stakeholders, including consumer groups, financial services
firms, trade associations, academics and individuals. These
proposals will provide consumers with greater consistency and
predictability around how the financial services redress
framework operates and will not water down consumer protections.
Ahead of the changes taking effect the FOS and FCA have outlined
separate proposals that will speed up complaint resolution, and
better help firms in the short term to resolve customer issues
and escalate major or emerging redress issues earlier.
