Modernising the Redress System – Policy Statement Published by the Financial Ombudsman Service

On 11 August 2026, the Financial Ombudsman Service (“FOS”) published its policy statement on “Modernising the Redress System”, confirming reforms that are likely to have a significant impact on how complaints are investigated, dismissed and determined. 

Summary

The reforms focus on three key areas:

1. The introduction of a registration stage,
2. Amendments to the dismissal framework, and
3. Changes to the “fair and reasonable” test. 

These changes are intended to reduce delays, improve the quality of investigations, provide clearer routes to resolution and minimise duplication.

We summarise the key changes and their implications below.

Key Changes

1. Registration stage

FOS will proceed with developing and introducing new preregistration and registration stages within its complaint-handling framework. 

The aim is to ensure that complaints are within its jurisdiction and sufficiently ready for investigation before they are allocated to a caseworker.

The new process will:

• Move information gathering to an earlier stage to ensure cases are better prepared before substantive investigation begins; 

• Introduce a clear point at which a complaint is assessed as ‘ready to investigate’ before investigation commences; and

• Retain safeguards for vulnerable consumers, with accessibility remaining an important consideration.

In terms of timescales, formal rules will be aligned with the forthcoming consultation on differential case fees later this year (FOS says this is to ensure a coherent overall framework where fees fairly reflect the effort that is required to resolve the dispute). FOS also intends to test its internal processes and conduct pilots before the registration stage is rolled out at some point in 2027.

For firms, this should result in fewer investigations commencing before the relevant facts and documents have been gathered. In turn, this could reduce the burden and delays caused by repeated requests for information during the investigation itself.

2. Changes to the dismissal framework

The reforms to the dismissal framework are intended to provide clearer routes to resolution and to improve the overall management of complaints. Decisions to dismiss complaints will remain discretionary, and the needs of vulnerable consumers will remain an important consideration. 

A key objective of the reforms is to strengthen FOS's ability to bring finality to disputes that have already been considered through an appropriate process, while retaining flexibility to allow matters to be revisited where new information emerges. 

The changes to the dismissal framework include:

• Retained dismissal grounds, including complaints that are frivolous or vexatious, where a complainant has acted abusively or unreasonably, where not all eligible complainants have consented, or where another forum such as the courts is better placed to determine the dispute.

• Reintroduced dismissal grounds (following revocation of the Alternative Dispute Resolution (ADR) Regulations 2015 on 6 April 2026 and the government’s confirmation that it will remove the Financial Ombudsman from the scope of the Digital Markets, Competition and Consumers Act 2024) for complaints about employment matters, investment performance or a respondent’s discretion under a will or private trust. This provides greater clarity about the types of disputes that fall outside FOS's remit.

• New dismissal grounds, including:

  • Perhaps most significantly for firms, where the underlying matter has already been reviewed under an appropriate regulatory review process. This aims to avoid duplication and promote consistency where a regulator-directed review has already addressed the relevant issues. The ground will not cover firm-led redress exercises nor circumstances where the subject matter complained of and the subject of the review are different.

  • Where there are “other compelling reasons” to dismiss a complaint. In response to concerns about the breadth of this ground, FOS has included guidance with non-exhaustive examples to provide clarity.

  • In relation to the ground to dismiss where the complainant has not suffered (or is unlikely to suffer) material financial loss, material distress or material inconvenience, FOS has removed reference to ‘material’ financial loss on the basis that it could cause indirect discrimination. For dismissal on this ground to be considered, there will therefore need to be evidence that the complainant has not suffered any financial loss, material distress or material inconvenience.

Collectively, therefore, these reforms give FOS greater tools to manage complaints that are unsuitable for investigation, have already been considered elsewhere, or raise issues that are more appropriately determined by the courts.

The formal rule changes will take effect from 1 October 2026. FOS has indicated that it will report after the first year of operation to provide transparency about the impact of the revised dismissal arrangements and identify whether any adjustment is required in light of experience.

3. Changes to the fair and reasonable test

FOS is also amending the fair and reasonable test in DISP 3.6.4R of the FCA Handbook. This will be amended to clarify that, when determining what is fair and reasonable in all the circumstances of the case, it will take into account only the following matters that were relevant at the time of the act or omission giving rise to the complaint:

• The law and regulations;
• Regulators’ rules, guidance and standards;
• Codes of practice; and
• (Where appropriate) what FOS considers to be good industry practice.

Although the rule change will take effect on 1 October 2026, FOS has confirmed that it will apply to all current and future complaints.

The revised rule is intended to reinforce the principle that firms should generally be assessed against the legal, regulatory and industry standards that applied at the time of the relevant conduct, rather than against standards that developed subsequently.

Firms may regard this as reducing the scope for complaints to be determined by reference to evolving expectations or retrospective assessments of what good practice should have been.

However, notably, FOS will retain reference to “good industry practice” pending the outcome of legislative scrutiny and the government’s proposals for a revised fair and reasonable test under the Financial Services and Markets Bill. This continued reference means that a degree of discretion remains and firms should not assume that FOS determinations will become purely rules-based.

Comment

Taken together, we consider the reforms signal a shift towards a more structured and predictable redress framework. While FOS has emphasised that consumer protection remains paramount, the changes are likely to be welcomed by firms seeking greater certainty regarding complaint handling, regulatory redress exercises and the application of the fair and reasonable test. 

Ahead of the dismissal and fair and reasonable rule changes taking effect on 1 October 2026, firms should consider:

• whether their complaint files clearly record the timing and nature of the relevant conduct;
• how they preserve the regulatory rules, guidance, codes and evidence of industry practice applicable during the relevant period;
• whether existing complaint or remediation processes identify cases already considered through a regulator-directed review; and
• whether complaint files are sufficiently complete to accommodate the greater emphasis on investigative readiness. 

Firms should also monitor the forthcoming consultation on differential case fees and the development of the preregistration and registration arrangements, which are expected to be rolled out in 2027.

Please contact us if you would like to discuss what these changes mean for your firm or your ongoing obligations when handling customer complaints. 

Across all areas of the consultation, respondents highlighted the importance of how the framework operates in practice. There was consistent emphasis on the need for clear guidance, transparent reasoning, reasonable discretion, and ongoing monitoring of outcomes.

https://www.financial-ombudsman.org.uk/files/324841/Modernising-the-Redress-System-policy-statement.pdf