Government publishes FOS consultation response and final reform plans

The government has published its response to the consultation on reforming the Financial Ombudsman Service (FOS) and set out its final plans, confirming it will legislate on the Fair and Reasonable test, referrals to the Financial Conduct Authority (FCA), a 10-year time limit, Chief Ombudsman responsibility and mass redress events, and that it will not make the FOS a subsidiary of the FCA¹. The consultation ran between July and October 2025 and received 601 responses from firms, trade associations, consumer groups, academics, individuals and other ombudsman services¹.

The FOS was established by the Financial Services and Markets Act 2000 as a dispute resolution service and must determine complaints "by reference to what is, in the opinion of the ombudsman, fair and reasonable in all the circumstances of the case"¹. Under the plans, where firms have met their obligations under relevant FCA rules, the FOS will be required to find that a firm has acted fairly and reasonably on that element of the complaint, and it must apply the rules that applied at the time of the act or omission complained about¹. Where the FOS considers there may be ambiguity in what FCA rules require, it will be required to request a view from the FCA, which will be obliged to provide one, with a 30-day limit for the FCA to respond¹. One or more parties will be able to request that a view be sought, but there will be no mechanism to appeal or circumvent the FOS's decision on whether a matter is referred, and no means to appeal FOS determinations in general to the courts¹.

The government will introduce an absolute 10-year time limit for bringing complaints to the FOS, with the FCA able to make exceptions focused on particular product features, expected to be longer-term products such as pensions, where a consumer's cause for complaint may take longer to come to light¹. It will also give the Chief Ombudsman overall responsibility for FOS determinations, make the appointment of the Chief Ombudsman subject to HM Treasury approval, and make the Chair of the FOS a government appointment¹. The Chief Ombudsman will continue to be accountable to, and performance managed by, the FOS Board¹.

The government has concluded it will not proceed with making the FOS a subsidiary of the FCA¹. It also intends to exclude the FOS from the new Alternative Dispute Resolution regime being established under the Digital Markets, Competition and Consumers Act 2024, and to require the FOS and FCA to publish regular thematic reports on how the FOS will consider certain types of complaint¹. The FCA and FOS have published a paper following consultation over the summer, seeking views on proposals to amend FOS rules at DISP 3 on the factors considered under the Fair and Reasonable test, a registration phase for complaints, and dismissal grounds¹. The FOS and FCA have also updated their Memorandum of Understanding on cooperation where an issue with wider implications is suspected or identified¹.

Why it matters for households

The changes affect anyone who has complained, or may complain, to the Financial Ombudsman Service about a financial firm. The 10-year limit would set an outer boundary on how far back a complaint can reach, with exceptions the FCA can make, expected to cover longer-term products such as pensions¹. The adapted Fair and Reasonable test would tie outcomes more closely to FCA rules, so where a firm met those rules the FOS would be required to find it acted fairly and reasonably¹. The referral mechanism would route questions of rule interpretation to the FCA, with no route to appeal the FOS's decision on whether to refer, or FOS determinations generally, to the courts¹. The government has decided not to alter the current arrangement on publishing FOS decisions for the time being, to support transparency¹. It also plans to remove the requirement on the FCA to consult before pausing complaints handling deadlines, and to introduce a power for the FCA to direct that relevant complaints with firms, or at the FOS, are paused¹.

What happens next

Delivering the reforms to the FOS's legislative framework will require primary legislation, which the government will take forward when Parliamentary time allows¹. Some changes can be made by the FOS and FCA within the existing framework through changes to the Dispute Resolution: Complaints sourcebook (DISP), and the FCA and FOS paper published alongside the response seeks views on those rule changes¹. The government says taking these changes forward in advance of legislation will allow consumers, firms and investors to begin to experience the benefits of reform in the short term¹.