The Financial Ombudsman Service

Introduction

The Financial Ombudsman Service (FOS) is the statutory dispute resolution body for consumer complaints against financial services firms in the United Kingdom. Established under Part XVI of the Financial Services and Markets Act 2000, the FOS provides a free, accessible, and informal mechanism for resolving disputes between consumers and financial firms. The FOS handles over 200,000 complaints annually across a wide range of financial products and services, including banking, insurance, investment, mortgages, and consumer credit.

Jurisdiction of the FOS

The FOS has both compulsory jurisdiction and voluntary jurisdiction. The compulsory jurisdiction, established under sections 226 to 227 of FSMA 2000, covers complaints against firms authorised by the FCA or the PRA, including banks, insurers, investment firms, mortgage lenders, and consumer credit firms. All authorised firms must be members of the FOS scheme and must submit to its jurisdiction for complaints from eligible complainants.

The voluntary jurisdiction, established under sections 227 to 228, covers firms that are not FCA-authorised but that choose to participate in the FOS scheme. Firms in the voluntary jurisdiction agree to be bound by the FOS’s decisions in respect of complaints within the scope of the scheme. The voluntary jurisdiction enables the FOS to provide consumer protection across a broader range of financial services than the compulsory jurisdiction alone.

A complaint to the FOS must be made by an eligible complainant — defined as a consumer (an individual acting outside their trade, business, or profession), a micro-enterprise, a charity with an annual income below £6.5 million, or a trustee of a trust with net assets below £5 million. The complaint must relate to an act or omission by the firm in carrying on regulated activities or other activities covered by the scheme.

The Complaints Process

The FOS operates a staged complaints process designed to be accessible and proportionate. Before referring a complaint to the FOS, the complainant must first give the firm an opportunity to resolve the complaint through its internal complaints procedure. If the firm fails to respond within eight weeks, or if the complainant is dissatisfied with the firm’s final response, the complainant may refer the complaint to the FOS.

Once a complaint is referred, the FOS first explores the possibility of mediation or early resolution, encouraging the firm and the complainant to reach a consensual settlement. If early resolution is not possible, the case is allocated to an ombudsman who investigates the complaint and makes a determination. The ombudsman considers the evidence from both sides, applies the relevant legal and regulatory framework, and decides what is fair and reasonable in all the circumstances of the case.

The ombudsman may take into account the law, the relevant regulatory rules and guidance, and codes of practice. Section 228(2) of FSMA 2000 provides that the ombudsman must determine a complaint by reference to what is, in the ombudsman’s opinion, fair and reasonable, having regard to all the circumstances of the case. This standard is distinct from the legal standard that would apply in court proceedings and gives the ombudsman flexibility to reach outcomes that reflect good industry practice and consumer expectations.

Awards and Remedies

If the ombudsman upholds a complaint, the ombudsman may make a money award and/or a direction that the firm take specified steps in relation to the complainant. The money award is limited to £415,000 (as of 2025–2026), covering financial loss, distress, inconvenience, or other consequential loss caused by the firm’s actions. The ombudsman may also direct the firm to take action such as correcting a credit file, providing a letter of apology, or honouring a contract.

The firm must comply with the ombudsman’s decision if the complainant accepts it. If the complainant does not accept the decision, it is not binding on either party, and the complainant may pursue the matter through the courts or through other dispute resolution mechanisms. The firm may not reject the ombudsman’s decision if the complainant accepts it, providing the complainant with a remedy that is binding on the firm without the need for court proceedings.

Judicial Review and Oversight

The FOS’s decisions are subject to judicial review, but the courts accord the FOS a broad margin of discretion. In R (Heather Moor & Edgecomb Ltd) v Financial Ombudsman Service (2008), the Court of Appeal held that the FOS’s determinations are not subject to appeal on the merits and that the FOS is entitled to reach decisions that are fair and reasonable even where they depart from the strict legal position. The court emphasised that the FOS is intended to provide a flexible, accessible, and informal dispute resolution mechanism and that a narrow approach to judicial review is consistent with that intention.

The FOS is subject to oversight by the Financial Conduct Authority, which reviews the FOS’s annual report and may make recommendations about the operation of the scheme. The FOS also publishes annual reports, data on complaint volumes and outcomes, and thematic reviews of complaints in particular areas.

Relationship with the Courts

The FOS provides an alternative to court proceedings for consumer financial disputes. The FOS process is free to the complainant, informal, and focused on what is fair and reasonable rather than on strict legal rights. The FOS is not a court and does not apply the law of evidence or the procedural rules of the Civil Procedure Rules.

The FOS has concurrent jurisdiction with the courts: a complainant may choose to pursue a claim in court rather than through the FOS, but may not pursue both simultaneously. The FOS may decline to consider a complaint if the matter has been or could be determined by a court or if there is an alternative dispute resolution mechanism available.

Conclusion

The Financial Ombudsman Service provides an accessible, efficient, and consumer-oriented mechanism for resolving disputes with financial services firms. The FOS’s broad jurisdiction, flexible remedial powers, and fair and reasonable standard enable it to deliver outcomes that reflect good industry practice and consumer protection objectives. The FOS plays an important role in the overall regulatory architecture, complementing the enforcement powers of the FCA and the prudential supervision of the PRA.