Government publishes FOS review consultation outcome with package of proposed reforms

HM Treasury published the outcome of its review of the Financial Ombudsman Service on 20 May 2026, setting out a package of proposed legislative reforms¹. The review was conducted by Emma Reynolds MP, Economic Secretary to the Treasury, who said the aim was to restore the FOS to its role as a dispute resolution service and ensure it is "no longer acting as a quasi-regulator"¹.

The government proposes an adapted Fair and Reasonable test, under which the FOS would be required to find a firm's conduct fair and reasonable where it has complied with relevant FCA rules, in accordance with the FCA's intent for those rules. The consultation states this will operate so that "there can be no retrospective application by the FOS of contemporary FCA rules"¹. Where there is ambiguity in how FCA rules apply, the FOS would be required to seek a view from the FCA, which would be obliged to respond; a party to a complaint could also request that the FOS seeks the FCA's view. The government says this will be set at 30 days, in line with the planned rule interpretation referral process set out by the FCA and the FOS¹.

On time limits, the government proposes an absolute limit in legislation requiring complaints to be brought within 10 years of the conduct complained of¹. The existing rules, which the consultation restates, prevent the FOS considering a complaint referred to it "more than: (a) six years after the event complained of; or (if later) (b) three years from the date on which the complainant became aware (or ought reasonably to have become aware) that he had cause for complaint"¹. The FOS publishes over 20,000 decisions a year, and is introducing a new standard interest rate on compensation awards, which will be updated to better reflect market conditions¹.

Other proposals include placing the function for determining cases with the Chief Ombudsman, obliging the FOS to refer potential wider implications issues or mass redress events to the FCA, and considering a requirement on the FOS to publish quarterly thematic guidance documents on how particular types of case are investigated¹. The government is also seeking views on whether there would be benefits to making the FOS a subsidiary of the FCA, so that both become part of the same corporate group¹.

The FOS was established by the Financial Services and Markets Act 2000, which sets out its legislative framework, and is operationally independent from both the FCA and the government under that framework¹. Final determinations, once accepted by the complainant, are binding on both the complainant and the respondent firm, and firms have no right to reject a FOS determination and no route of appeal¹. The consultation says the FCA and the FOS will begin implementing changes from today where they can, ahead of the legislation needed for the government's proposed reforms¹. The review built on a Call for Input published by the FCA and the FOS in November 2024¹.

Why it matters for households

The proposals would change how long consumers have to bring a complaint and how the FOS decides cases. The 10-year absolute limit would sit alongside the existing six-year and three-year tests, so a complaint about conduct more than 10 years ago could not be brought even where the complainant only became aware of the cause for complaint later¹. The adapted Fair and Reasonable test would mean that where a firm complied with FCA rules as the FCA intended them at the time, the FOS would be required to find the firm's conduct fair and reasonable, and contemporary rules could not be applied retrospectively¹. The referral mechanism would allow a party to a complaint to ask the FOS to seek the FCA's view on how a rule applies¹. The consultation also covers how mass redress events are handled, which the review links to delays in resolving other cases and consumers' access to redress¹.

What happens next

The consultation document states it will remain open for 12 weeks, closing on 8 October 2025¹. The government says it will use changes to legislation, when Parliamentary time allows, to deliver the reforms¹. The FCA and the FOS are publishing a response to their Call for Input alongside the consultation, consulting on changes including an updated framework for identifying mass redress events, a proposed new FOS case process and a new approach to lead complaints¹. The FOS is also introducing a new standard interest rate on compensation awards¹. The consultation notes that when the FCA's Consumer Composite Investments regime replaces the ADR Regulations in Spring 2026, it will remove the FOS from the scope of that legislation¹.