Major Financial Ombudsman Service reforms to shape complaints and redress landscape

Anthony Harrison and Jonathan Cavill, financial services experts at Pinsent Masons, were commenting after the FOS published its policy statement on modernising the redress system, alongside wider government proposals to reform the UK redress framework.

Harrison said: “The significance of these reforms extends beyond procedural changes to the way complaints are handled. This is highly relevant to banks, insurers, wealth managers, lenders, payment firms and other regulated businesses that face FOS complaints.”

The policy statement (46 pages/711 KB PDF) and wider reforms seek to address long-standing industry concerns around predictability, duplicate redress, finality and the relationship between FOS decision-making and regulatory standards, while preserving consumer access to redress.

The reforms introduce new dismissal powers, a registration stage for complaints, greater emphasis on finality, and changes to the way the Ombudsman approaches complaints and interacts with regulatory redress schemes. The government is also proposing wider reforms through the Financial Services and Markets Bill, including a regulatory referral mechanism to the Financial Conduct Authority (FCA) and changes to the ‘fair and reasonable’ test.

Under the expanded dismissal framework, the FOS will be able to dismiss complaints that are more appropriately dealt with through other routes, are already being investigated elsewhere, or where the firm has carried out a regulatory review or redress exercise in line with FCA requirements. The reforms are intended to help the FOS focus on disputes that are best suited to its role as a quick and informal alternative to the courts, while reducing duplication and improving consistency across the redress system.

Harrison said: “One of the most notable aspects is the increased focus on ensuring the Ombudsman and FCA operate within a more integrated framework, particularly where issues have wider market implications. Firms have long sought greater certainty about the standards against which complaints will be assessed and when complaints should appropriately fall away. The new dismissal powers and recognition of properly conducted regulatory reviews are likely to be welcomed by many firms.”

Following the announcement, firms should review their complaints handling and governance frameworks while considering how complaints may be filtered or dismissed under the expanded dismissal powers. It may also be appropriate for businesses to reassess their approaches to proactive remediation and redress exercises while reviewing litigation, FOS and regulatory strategies holistically. Firms should also monitor implementation of the wider legislative reforms.

Cavill said: “Firms should not assume the changes will mean fewer complaints or regulatory scrutiny. The reforms raise the importance of robust complaint handling, governance and remediation processes. Businesses that can demonstrate fair customer outcomes and effective complaint resolution at an early stage are likely to be best placed to benefit from the new framework.”