On 16 March 2026, the Financial Conduct Authority (FCA) and the Financial Ombudsman Service (FOS), jointly published a second consultation paper in relation to modernising the redress system.

Background

In July 2025, the FCA and FOS consulted in CP25/22 on modernising the redress system, and the Government consulted on certain legislative changes, confirming today that it will legislate when Parliamentary time allows.

Summary

Ahead of legislation coming into force, the FCA and FOS have identified possible changes within the existing framework and this paper sets out those measures.

The first part of this paper is a consultation, in which the FOS is consulting on making the following changes:

  • Introducing a registration stage at the FOS: this proposal would be to introduce an early-stage assessment to decide if a complaint is ready, and has sufficient evidence, before it can progress to the more detailed investigation stage.
  • Amendments to the FOS’s grounds for dismissing a complaint: the changes proposed would introduce certain now dismissal ground as well as introducing modernised versions of those that existed before the requirements set out by the ADR Regulations 2015.
  • Amendments to the fair and reasonable test in the Dispute Resolution Sourcebook (DISP) 3.6.4R: this would be to remove reference to the FOS considering good industry practice and to make clear that only the standards applicable at the time of the act or omission complained about will apply.

The second part of this paper is a policy statement, in which the FCA confirms its approach to the following:

  • Introducing guidance in SUP 15: this would be to clarify when firms should report emerging issues to the FCA, alongside Non-Handbook Guidance which includes good and poor practice examples on how firms can proactively identify and resolve redress issues.
  • Rule changes for improved efficiency by the FOS and the Financial Services Compensation Scheme (FSCS): this includes changes to DISP intended to clarify and reinforce good practice, not impose disproportionate, new burdens on firms, and to the Compensation Sourcebook (COMP) to streamline FSCS processes, removing blockers such as by enabling the FSCS to determine that a firm is in default even when it is not co-operating, that can lead to higher operational costs that are ultimately met by levy paying firms.

Next steps

The FCA and FOS have set out that they welcome views by 11 May 2026 and that it aims to publish another policy statement on all the proposals consulted on later in 2026.

The guidance in SUP 15 and DISP changes will come into force on 1 June 2026, other than the DISP change in relation to applicability for Gibraltar-based firms which will come into force on 17 March 2026 alongside the changes to COMP.