17th July 2025
While the Chancellor has been talking down the Financial Ombudsman, the results of a review confirm that it does a pretty good job and the changes proposed are fairly cosmetic
Bashing the Financial Ombudsman Service has long been a popular pastime with those who work in financial services. The main arguments against it are that it is inconsistent, and that at its worst, it writes new regulation via the backdoor.
I understand why firms sometimes feel this way. Ombudsman decisions don’t always look consistent because they are based on what the adjudicator deems to be “fair and reasonable”. Each individual case also turns on its facts. Two cases may look very similar – but a small difference may mean a lot in terms of the outcome for each of those complaints.
By and large, I think the Ombudsman has done a great job over the past two and a half decades. It’s free and independent - and has helped many millions of consumers. It has, however, also undeniably made some bad decisions – both in favour of the consumer as well as in favour of businesses. One of my personal pet hates is that it often takes a company's word at face value - and does not force them to evidence the claims they make.
Nevertheless, it gets it right most the time and it's inevitable that it slips up given the hundreds of thousands of cases it deals with every year.
A few years ago, the FOS was the subject of a Dispatches documentary that I was involved in, which highlighted some training and governance issues that appeared to be driving poor decisions. That led to an independent review and a number of reforms. And during Abby Thomas’ time at the helm, more reforms were made to streamline systems, reduce processing times and to deter claims management firms from bringing spurious complaints.
In spite of this progress, the FOS still found itself the target of an unexpected attack from the Chancellor Rachel Reeves when she got going on her deregulatory, pro-growth mission at the end of last year.
In her Mansion House speech in November, she announced she was ordering a review of the FOS.
And today, after several months of consultation, the draft reforms were finally published – in papers from both the Treasury and FCA.
Having read the papers this morning, my first impression was that none of this will really amount to anything. Civil servants have been forced to admit that the system works reasonably well. And while the proposed reforms will amount to some tweaks to governance, and some fresh clarity about the “fair and reasonable” principle – the system will emerge largely unscathed.
Sadly, consumers will not be given the opportunity to escalate final Ombudsman decisions to the courts – other than via a judicial review of the process. But that is no change on where we are today.
And while the Treasury is going to put a 10 year time limit on complaints – from the moment the incident took place – they have allowed the FCA to extend this for longer-term products such as pensions, mortgages and protection.
So when all is said and done, I think it’s unlikely these changes will have any serious impact. The FOS will continue to make decisions that some find surprising – and firms will continue to complain about the unpredictability.
Nevertheless, you should expect that in her next Mansion House speech this evening – the Chancellor will claim these reforms as another victory on her mission to slash red tape and return Britain to growth.
In the same speech, she will also laud the FCA for its other consultation published today – which looks to water down some of the processes around the senior managers and certification regime. I’m no specialist in this area – but I didn’t spot anything particularly worrying in these proposals. We shouldn’t forget, however, that change means cost. Firms will now need to upskill compliance managers on a new raft of rules – none of which look like they will have a massive impact in terms of regulatory burden and cost.