Financial Ombudsman outlines next phase of service reforms

Consumers and firms will benefit from a more efficient Financial Ombudsman Service as new measures announced today mark the next step in a series of reforms to streamline and modernise the complaints process.

Following a joint consultation with the Financial Conduct Authority (FCA), we have confirmed that we will introduce changes to our operations to allow us to focus our resources on the cases we were set up to resolve as a quick and informal alternative to the courts.

These reforms include:

• An amendment to rules to provide greater clarity that our 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.
• New powers to dismiss complaints 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 1 October 2026.
• A new registration stage to be rolled out next year, following a consultation on differential case fees later this year, to ensure that complaints referred to our 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.

Later this year, we will publish the first of our joint thematic reviews with the FCA to provide more insight on the types of complaints we see and our approach to resolving them.

This will:

• help to inform firms’ own complaints handling
• prevent similar cases from needing to be escalated to us, and
• demonstrate how outcomes are aligned with regulators’ rules.

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.

The changes announced today are part of a wider series of steps the Financial Ombudsman Service has taken to modernise its service. This includes:

• 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 that we make to better reflect present economic conditions.

We have also delivered a series of digital improvements – with online portals for businesses and consumers rolled out and an enhanced online complaint form streamlining and simplifying the complaint journey – as part of our drive to make our service increasingly easy to use for customers.

Legislative changes, to the way the redress system and the Financial Ombudsman Service operate, are progressing through Parliament in the Financial Services and Markets Bill.