Call for input on modernising the redress system

3rd February 2025

The Finance & Leasing Association (FLA) has responded to the call for input on modernising the redress system, highlighting concerns about the Financial Ombudsman Service (FOS).

The FLA says that FOS has evolved away from the type of alternative dispute resolution body that Parliament originally intended it to be.

While it still has a remit to resolve individual complaints, the FOS adjudicates on what it thinks is ‘fair and reasonable in all circumstances of the case’. In practice, this means that it can reinterpret the Financial Conduct Authority’s rules – it doesn’t have to accept the original intent of the rule nor method of compliance by the firm. FOS decides what should have happened and holds the firm to that standard.

The result is that firms complying with FCA rules can still find themselves embroiled in mass redress events. This generates regulatory uncertainty which provides an opportunity for claims management company activity, introduces additional risk to the operation of the market and increases the cost of finance to the end customer – all of which is detrimental to economic growth.

In addition, FOS decisions have become precedent-setting over time as firms have been required to implement new, uncosted measures across their businesses.

Stephen Haddrill, Director General of the FLA, said “We should not have to point this out, but at a bare minimum, FOS and firms must use the same rulebook. Anything else is unacceptable and an open invitation to further CMC activity, increased costs and continuing uncertainty.

“The necessary changes to improve how the Financial Ombudsman Service operates will not be achieved by tinkering at the edges of FOS’s remit and approach, but by fundamentally reviewing its role in the regulatory architecture.”