FOS Reform: From Review to Action

In March 2026, HM Treasury published its consultation response confirming the legislative changes it intends to make to the FOS framework. Simultaneously, the FCA and FOS published a further consultation paper (CP26/9), setting out proposals that can be implemented ahead of primary legislation. Together, these publications represent the most significant overhaul of the FOS since its creation under the Financial Services and Markets Act 2000 (FSMA). This briefing summarises the key proposals.

The legislative package 

HMT has confirmed that it will legislate to make the following changes:

• Adapted Fair and Reasonable Test: Where firms have met their obligations under relevant FCA rules, the FOS will be required to find they acted fairly and reasonably. This is the centrepiece of reform and directly seeks to address the longstanding industry concern about a lack of alignment between FOS decision making and FCA’s standards, that undermined certainty for consumers and firms. Where FCA rules are not relevant to a complaint, for example, straightforward maladministration, the existing fair and reasonable approach will continue to apply. HMT will also take a power to specify that particular rules, including potentially the Principles for Business and the Consumer Duty, may be excluded from or treated differently under the adapted test. 
• Formal referral mechanism to the FCA: HM Treasury will introduce a statutory requirement for the FOS to refer matters to the FCA where there is ambiguity in FCA rules, or where a complaint raises issues with wider implications for consumers or firms. The FCA will have 30 days to provide an initial response. Parties to a complaint will be able to request a referral, but the FOS will retain the final decision on whether referral criteria are met (the criteria will be set out in secondary legislation). There will be no right to appeal for referral decisions or final determinations by the FOS.
• Introduction of a 10-Year time limit: FOS will not be able to consider complaints concerning acts or omissions that occurred more than 10 years ago. The FCA will have power to set limited exceptions, expected to focus on longer-term products such as pensions. The FCA is due to set out its proposals in due course. 
• Mass Redress Events (MREs) and Consumer Redress Schemes: The FCA will gain stronger tools for managing MREs, including 
  • the powers to pause complaint handling timescales for firms without public consultation
  • the powers to direct the FOS to pause complaints determinations, and refer relevant complaints at the FOS back to firms for them to consider under the terms of a section 404 FSMA redress scheme; and
  • the introduction of a simplified legal test that must be met under section 404 FSMA for the FCA to impose an industry-wide redress scheme. The section 404 FSMA test will be linked to the FCA’s operational objectives.

• Governance: The Chief Ombudsman will be given overall responsibility for FOS determinations to improve consistency. The Chair of FOS will become a government appointment. HM Treasury has confirmed it will not proceed with making the FOS a subsidiary of the FCA, having concluded the wider reform package is sufficient to achieve its objectives. 
• Transparency: The FCA and FOS will produce regular thematic reports explaining how the FOS approaches particular types of complaints. Publication of individual final determinations will continue, but HM Treasury has stressed that individual decisions are not intended to have precedent-setting effect; firms should look to the thematic reports for guidance. The FCA/FOS will set out next steps on the thematic reports in due course.

FCA/FOS Consultation: Changes ahead of legislation

Although the legislative reforms are dependent on primary legislation and Parliamentary time, several measures can be implemented more swiftly under the FCA’s existing rule making powers, including changes to DISP, COMP and SUP. These include:

• Fair and Reasonable Factors: The FOS/FCA proposes to amend DISP to remove reference to the FOS considering good industry practice and to make clear that only the standards applicable at the time of the act or omission complained about will apply. The change will not be retrospective.
• Introduction of pre-registration and registration stages: New stages will sit between referral and investigation. Early assessment and information gathering will take place at the pre-registration stage, ensuring only complaints that meet the threshold for investigation progress to the registration stage. Complaints must meet minimum evidential standards and may be held or moved back to pre-registration where, for example, they relate to ongoing FCA regulatory action, or where a ‘lead case’ is being reviewed.
• Expanded dismissal grounds: The consultation proposes to broaden and clarify the grounds on which complaints may be dismissed at an early stage. Some of the grounds for dismissal are comparable to those that existed before the introduction of the 2015 ADR Regulations. New or expanded grounds include:
  • Complaints where the complainant has acted abusively or unreasonably in engaging with the FOS
  • Where the subject matter has previously been considered by the FOS unless material new factual evidence (as opposed to new arguments, case law or regulations) has become available; and
  • Where issues relevant to the subject matter of the complaint have or are being dealt with, by a comparable complaints scheme, regulatory or law enforcement body.

The proposals also include the re introduction of a residual ground allowing dismissal where there are other compelling reasons. Non exhaustive examples are provided, including a new example, of where the compensation sought significantly exceeds the FOS’s statutory cap on money awards.

• Test cases: ADR Regulations required the complainant’s consent before a complaint was referred to a court to consider as a test case. That requirement will be removed and instead the FOS will have to consider the likelihood that the parties will actually take the complaint to court.
• MRE criteria and reporting: FCA has defined MREs and published new SUP 15 guidance (to take effect on 1 June 2026) clarifying when firms should notify the FCA of issues, including where an issue:
  • May affect a high number of consumers (at least 40% of the firm’s consumers from the affected product line or service), or
  • Has a high potential redress bill, if complaints are upheld by the firm, the FOS or the courts (£10m or more, or 50% of the firm’s annual revenue from the affected product or service line), or
  • May leads to redress that will negatively impact the firm’s capital adequacy or solvency, or
  • Has led or may lead to a significant spike in consumer complaints, or
  • May lead to substantial financial loss (>£10k per consumer) for two or more consumers).

• Lead Complaints Process: FOS will work with stakeholders to refine the lead complaints process, including setting clear criteria for identifying novel and significant issues, establishing proportionate governance and safeguards (especially for vulnerable consumers), and developing a time limited pausing framework. This work will also cover consistent communications and transparency around lead decisions and may lead to further consultation with the FCA.
• Read across rules: The FOS and the FCA are aware that there are concerns that DISP guidance on factors firms may take into account when considering complaints can result in individual FOS decisions being treated as de facto binding standards. The FCA intends to revisit this issue later, once the interaction with wider redress reforms is clearer.
• DISP and COMP Operational Changes. A series of practical changes are proposed, including:
  • Requiring firms to state complaint response deadlines in acknowledgement letters (to reduce premature FOS referrals) – this comes into force on 1 June 2026;
  • Clarifying cooperation obligations – this came into force on 17 March 2026; and
  • Simplifying FSCS eligibility and claims processes (this came into force on 17 March 2026). 

FOS will also consider the impact of the proposals on its funding model and has said it will consult on any changes in its annual Plan and Budget with a view to implementing any changes in 2027/28.

Next steps

HM Treasury says that the government will take forward primary legislation “when Parliamentary time allows”. Draft legislation has not yet been published, and no further clarity is provided on the likely legislative timetable. 

The consultation on non-legislative changes closes on 11 May 2026, with FCA and FOS anticipating that they will publish a Policy Statement later in 2026.