FOS Reform continues at pace – Policy Statement sets out new service reforms

FOS has published its Policy Statement on Modernising the Redress System, confirming the changes it will make to its complaints process. The reforms include:

• the introduction of a new registration stage next year to strengthen early case handling 
• new powers, effective 1 October 2026, to enable the FOS to dismiss complaints that are inappropriate for its process and may be better addressed through other channels and 
• an adapted "fair and reasonable" test to confirm that FOS’s decisions will be based on the standards applicable at the time of the act or omission in question, rather than being applied retrospectively. Proposed changes to the reference to “good industry practice” will be deferred pending the Financial Services and Markets Bill’s passage through Parliament.

This briefing summarises the key reforms and their implementation dates and examines how the Policy Statement departs from Consultation Paper 26/9. For further information on the consultation paper (CP26/9), see our earlier briefing.

Summary of the reforms in the Policy Statement

1. Introduction of a new registration stage

The FOS will introduce a registration approach, as set out in CP26/9, so complaints are "ready to investigate" before they progress to investigation. The registration stage will ensure that complaints fall within FOS’s scope and are ready for investigation before being assigned to a caseworker. This is intended to reduce delays and repeated information requests caused by cases arriving without the core information needed to progress the complaint.

Formal DISP rule changes for the registration stage have been deferred. The FOS will align implementation with its case fees consultation later in 2026 so fees reflect the effort required to resolve disputes. The FOS will begin testing the proposed approach through pilots in the fraud and scams casework in October 2026 with rule changes expected in April 2027 at the earliest.

2. Expanded dismissal rules

The FOS will proceed with proposals to update the dismissal framework. Changes to DISP 3 will broaden and clarify the grounds on which complaints may be dismissed at an early stage.

Some of the grounds for dismissal are comparable to those that existed before the introduction of the 2015 ADR Regulations. New or expanded grounds include:

• Complaints where the complainant has acted vexatiously, abusively or unreasonably in engaging with the FOS 
• Where the subject matter has been considered previously by the FOS unless material new factual evidence (as opposed to new arguments, case law or regulations) has become available 
• Where issues relevant to the subject matter of the complaint have or are being dealt with by a comparable complaints scheme, regulatory or law enforcement body and
• Where there are other compelling reasons for dismissal.

Examples given of “other compelling reasons” for dismissal include that the complainant has not suffered (or is unlikely to suffer) financial loss, material distress or material inconvenience. This example marks a change from the Consultation Paper. The FOS has removed the word “material” from the financial loss reference, citing the risk of indirect discrimination and the impact on low-income households.

Rule changes take effect on 1 October 2026 for complaints referred on or after that date, with the FOS to report on their impact after the first year.

3. The Fair and Reasonable Test 

DISP will be amended to clarify that its decisions are based on the standards applicable at the time of the act or omission which is complained about. This rule change will take effect from 1 October 2026. It will apply to all current and future complaints.

In the most significant departure from CP26/9, the FOS has decided not to remove references to its consideration of "good industry practice" from its fair and reasonable test under DISP. The FOS concluded that doing so now could cause confusion given the Financial Services and Markets Bill’s progress through Parliament (see our briefing for further information) and the likely short-term nature of the change. The FOS will keep this position under review.

Key Dates and Next Steps

Comment

The new Policy Statement represents the latest development in the wider package of reforms – the most significant overhaul of the FOS since its creation. Measures already undertaken include an updated Memorandum of Understanding with the FCA to align FOS decisions with regulatory rules, the introduction of charges for professional representatives referring cases and adjustments to the interest rate applied to certain FOS awards to reflect current economic conditions.

Looking ahead, the FOS and the FCA plan to publish their first joint thematic review later this year, which is expected to provide greater insight into the types of complaints received and FOS's approach to resolving them. This is intended to inform firms’ own complaints handling and prevent similar cases being passed to the FOS.

The other key element of the reforms – the Financial Services and Markets Bill – continues to progress through Parliament. Having completed its Committee stage, the Bill is now at Report stage in the House of Lords and may receive Royal Assent before the end of this year.