Financial Ombudsman Service facing reform as new consultation launched – here's what we know so far

In a speech delivered on Thursday 14 November, Chancellor Rachel Reeves said that change was needed to “create a surer climate for investment".

She added that "a new agreement" would be developed between the Ombudsman and regulator the Financial Conduct Authority (FCA). This will set clearer expectations on how the two bodies work together, especially on issues around historic mis-selling – such as the huge ongoing car finance investigation.

A joint consultation launched today (Friday 15 November) will now consider how the complaints system can be "modernised" so that fewer complaints are escalated to the Ombudsman and so that consumers get quicker and better outcomes.

Why changes are being considered

According to the FCA and the FOS, some of the key reasons for reform include:

• Some firms struggling to respond to complaints within the eight weeks required due to the large number of complaints they're getting. This means that more complaints get escalated to the FOS before the firms themselves can look into them.

• To reduce the risk of clashes between the FCA and FOS. The two organisations' different approaches could cause issues if, for example, the FCA sets out regulatory requirements that differ from the outcomes that FOS has reached on individual cases.

• Making it easier for consumer groups to report issues that may impact lots of people. This would help ensure that any systemic issues are identified and tackled earlier.

What the consultation will look at

At this stage, the FCA and FOS aren't setting out any specific new rules or proposals for how they will operate. Rather, they're consulting on possible changes they could make to improve how consumer complaints about financial firms are dealt with.

The consultation will focus on:

• Making sure consumers receive appropriate redress when things go wrong.

• Looking at how firms can identify practices that are harmful to consumers, proactively address these issues, and resolve complaints more effectively themselves. This will prevent the number of complaints that are escalated to the FOS, meaning that consumers don't have to wait as long for their complaints to be resolved. An example of this could be instructing businesses to review their past practices on a regular basis.

• Identifying redress issues earlier so they can be resolved swiftly and efficiently. This could mean improving the ways that consumer and financial groups can communicate with the FCA and FOS so that they are more prepared for "mass redress events", such as the PPI scandal.

• Reducing the number of "meritless" complaints from claims management firms. Many complaints that are escalated by claims management firms don't work out in the consumer's favour, according to the FCA and FOS. These firms also charge fees, meaning that consumers get less redress if their complaint is upheld.
  
  To reduce the number of meritless complaints from claims management firms, the FOS has confirmed plans to introduce a £250 fee for claims firm‑represented cases, reduced to £75 if the outcome is in the consumer’s favour.

The deadline for individuals and groups to give their views is 30 January 2025. The FCA and FOS will summarise the responses and publish next steps in the first half of 2025.

For now, you can continue to use the Financial Ombudsman Service as normal

The Financial Ombudsman covers a huge range of areas, including bank accounts, credit cards, debt collection, mortgages and loans, pensions and savings. Here's how to make a complaint:

• You MUST complain directly to the company in the first instance. It has eight weeks to consider your complaint and give you its "final response".

• Once the company has given its final response, or eight weeks has passed since your initial complaint, you can complain to the FOS. The best way to complain is via its online form. It has a "complaints checker" where you answer some initial questions about your complaint, then it'll take you to the relevant form.
  
  However, you can also give the details of your complaint over the phone, or request a form to be sent to you, by ringing 0800 023 4567 between 8am and 5pm, Monday to Friday.

• You won't get a judgement from FOS right away. Disputes that go all the way can take three to nine months.

• Already made a complaint? Have your reference number handy if you want to chase a complaint. If you're after an update on an existing case, send an email quoting your case reference number, or send a direct message on its social channels, or dedicated contact us page.