FOS confirms next phase of redress system reforms

Following a joint consultation (CP26/9) with the Financial Conduct Authority (FCA), the Financial Ombudsman Service (FOS) published a policy statement in August 2026, finalising a series of measures which form part of an ongoing process of modernising the consumer complaints framework. The changes concern three areas: the introduction of a registration stage¹; a refreshed dismissal framework; and an amendment to the ‘fair and reasonable’ test in DISP 3.6.4R.

Registration stage

As an operational change, the FOS is introducing a registration stage before complaints are allocated for investigation. The FOS notes that cases currently reach investigation in varying states of readiness, and complaints take more than three weeks longer, on average, to receive a first assessment where key information is late or must be chased. This is reflected in FOS data which shows that more than 20% of cases move back from investigation to earlier stages and that more than 10% of cases ‘resolved’ in 2024/25 were withdrawn or abandoned before a first assessment.

Registration is therefore intended to address this procedural weakness by ensuring that complaints are within scope and ‘ready to be investigated’ before substantive case handling begins. The reform prescribes when information must be provided, rather than the nature of the information itself.

The FOS remains committed to adopting the registration approach but will defer implementation until it can be aligned with the FOS’s forthcoming consultation on case fees. It will test the approach through pilots in the interim, starting with fraud and scams cases in October 2026. Registration rule changes are not expected before April 2027 at the earliest.

Dismissal framework

The second area of reform concerns dismissal powers. In CP26/9, the FOS proposed updating and clarifying the DISP 3 dismissal framework by retaining and refining existing powers, reinstating certain original powers withdrawn in 2015 (to implement the Alternative Dispute Resolution for Consumer Disputes Regulations 2015) and adding new grounds to reflect current circumstances.

New and reinstated dismissal grounds include:

• Prior regulatory review. The ground applies where the respondent has already reviewed the complaint in line with established regulatory standards. This is intended to avoid duplication where complaints have been properly considered within a regulatory framework, but it will not apply to firm-led redress exercises.
• Prior consumer redress scheme. This is relevant where an FCA consumer redress scheme has addressed the subject matter of the complaint. The ground does not apply to complaints that fall outside the scope of a statutory consumer redress scheme, and will not affect the FOS's ability to consider complaints within the scope of a scheme where a firm has not acted in accordance with the scheme rules.

• Residual grounds. The FOS will introduce a residual dismissal ground for ‘other compelling reasons’. Non-exhaustive guidance examples are included with the objective of promoting clarity and consistency while retaining flexibility. The FOS notes that these powers are not wholly new but are being reintroduced in a new form.

  The FOS has decided to remove the 'material' qualifier in relation to financial loss in this dismissal ground, stating that the example of a compelling reason will become: “the complainant has not suffered (or is unlikely to suffer) financial loss, material distress or material inconvenience”. While this reflects the previous wording, it does mean that any financial loss, however small, prevents the FOS from even considering the use of its discretion here. This is out of line with the other grounds in this section, which all have the qualifier, and the FOS could still decline to exercise its right not to consider a complaint of trivial value if there were wider reasons for doing so.

• Pre-2015 grounds. The FOS will reintroduce dismissal grounds for complaints concerning employment matters, pure investment performance and the exercise of discretion under wills or private trusts; it considers that these issues are generally better suited to specialist legal or regulatory frameworks.
• Parallel proceedings / more appropriate forums. These grounds cover: complaints that are being, or have been, considered by a comparable complaints scheme, regulatory or law enforcement body, or dispute resolution process; complaints that are or have been subject to court proceedings; and complaints better suited to court, arbitration or another complaints scheme.
• Prior FOS consideration. The FOS may already dismiss complaints that raise the same subject matter as a matter it has previously considered or excluded. It has added ‘factual’ as a qualifier to the new evidence exception to reinforce finality and limit reopening of cases based on new argument, reinterpretation or legal and regulatory developments.

The new dismissal framework will come into effect on 1 October 2026. The FOS emphasises that decisions under all dismissal grounds will remain discretionary and case-specific, and that the needs of vulnerable consumers and those requiring reasonable adjustments will remain important considerations.

‘Fair and reasonable’ test

The FOS will amend DISP 3.6.4R to clarify that, when assessing what is fair and reasonable in all the circumstances, the FOS will take account only of: the law and regulations; regulators’ rules, guidance and standards; codes of practice; and, where relevant, good industry practice, as they applied at the time of the act or omission. Although the rule change will be reflected in the rules from 1 October 2026, in practice, it will now apply to all current and future complaints given it is clarificatory only.

The FOS has decided not to remove ‘good industry practice’ from DISP 3.6.4R. Following publication of the Financial Services and Markets Bill, which provides greater clarity on the Government’s proposed adapted fair and reasonable test, the FOS considers it preferable to await Parliamentary scrutiny before making any further changes. The Financial Services and Markets Bill is progressing through Parliament and includes legislative changes affecting the redress system and the FOS.

Conclusion

As we noted in our earlier article on modernising the redress system, the package of reforms makes progress against the four requirements necessary to achieve greater predictability: clarity of expectation on firms; early identification of emerging issues; prompt and orderly action; and confidence in the decision-making process. However, it remains to be seen whether the reforms will fully achieve that in practice. Further, and potentially more significant, changes may follow through the Financial Services and Markets Bill so firms will need to continue to watch this space.

¹ The FOS uses ‘registration stage’ to refer collectively to the pre-registration and registration stages.