When a complaint with a regulated financial firm cannot be resolved, the Financial Ombudsman Service (FOS) provides an independent route to redress. It is intended to be accessible without the cost and formality of court proceedings.
HM Treasury has now announced what it calls the most significant reform package since the service was created. The aim is a system that is faster, more predictable and more closely aligned with the Financial Conduct Authority (FCA). Those aims matter to consumers as well as firms — but the detail determines whether predictability and fairness remain in balance.
What the government proposes to change
The central proposal is to adapt the FOS “fair and reasonable” test. Where a firm has met its obligations under the relevant FCA rules, the Ombudsman would be required to find that it acted fairly and reasonably.
The government also plans a referral mechanism under which the FOS must seek the FCA’s view when rules are ambiguous or a complaint may have wider implications. An absolute ten-year time limit would apply to complaints, with the FCA able to create exceptions. The Chief Ombudsman would take overall responsibility for determinations, and the FCA and FOS would publish regular thematic reports to explain how certain complaint types will be treated.
HM Treasury says these measures will restore the FOS to its original role as a fast and impartial dispute-resolution body, reduce inconsistency and provide greater certainty for consumers and firms.
Think clearly: The proposals are not yet a reason to assume that existing complaint rights have disappeared. Some measures require legislation, and implementation details still matter.
Why the FCA chief has reservations
FT Adviser reported on 16 July that FCA chief executive Nikhil Rathi had aired reservations about aspects of the reforms before the Treasury Committee. That deserves attention because the reform seeks closer alignment with the FCA’s own rules.
The tension is straightforward. Rule-based consistency can make outcomes easier to anticipate and discourage the FOS from creating what firms see as regulation through individual decisions. Yet the Ombudsman was also designed to consider the facts of a particular case and reach an outcome that is fair and reasonable. A firm might follow a rule’s minimum wording while a consumer still experiences an unusual or unforeseen form of harm.
A balanced system therefore needs clear rules, timely decisions and enough discretion to recognise exceptional circumstances. Greater certainty for firms should not become a shortcut around examining whether the consumer was treated properly.
What could improve for consumers
The FCA and FOS consultation describes a complaints-registration stage, clearer dismissal grounds, earlier reporting of emerging problems by firms and guidance on identifying and correcting harm. If implemented well, these changes could reduce the time consumers wait for an answer and encourage firms to resolve valid complaints before they reach the Ombudsman.
Regular thematic reports could also make the system easier to understand. Consumers and firms would have a clearer view of how recurring problems are likely to be assessed, while the FCA could respond more quickly when a problem affects many customers.
What to do if you have a complaint
Begin with the firm’s formal complaints process and keep a clear record of letters, emails, calls, statements and dates. Explain the outcome you believe would put matters right. If the firm does not resolve the complaint, check the FOS rules and deadlines promptly rather than assuming an old problem can wait indefinitely.
The proposed ten-year longstop makes good record-keeping even more important for pensions, investments and other arrangements held over many years. It does not remove shorter complaint deadlines that may already apply, so consumers should always check the current position.
This is general information, not legal advice and not an assessment of any individual complaint.
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