Financial Ombudsman Service Reforms: What the New Dismissal Rules Mean for Firms
From 1 October 2026, the Financial Ombudsman Service (FOS) can dismiss complaints on a restructured set of grounds, including where a firm has already reviewed the matter under regulatory standards or where another body is dealing with it. A clarification of the fair and reasonable test in DISP 3.6.4R takes effect on the same date, but "good industry practice" stays for now, and a new registration stage is deferred to April 2027 at the earliest.
These decisions are set out in the FOS's Modernising the Redress System: policy statement, published on 11 August 2026. The rules are made in the FCA Handbook with the consent of the Financial Conduct Authority (FCA), so they affect every firm whose customers can refer complaints to the FOS, and they raise a practical question: would a firm's records, final responses and past reviews stand up to a service more willing to close cases early?
What Has the Financial Ombudsman Service Decided?
The FOS consulted on CP26/9, issued jointly with the FCA, between March and May 2026 and received 92 responses. The policy statement covers three strands:
Registration: a stage to ensure complaints are ready to investigate. Confirmed in principle, with rules deferred.
Dismissal: refreshed grounds following revocation of the Alternative Dispute Resolution (ADR) Regulations 2015 on 6 April 2026. Proceeding from 1 October 2026 with one amendment.
The fair and reasonable test: a clarification that decisions reflect the standards applicable at the time. Proceeding, without removing good industry practice.
The changes are made by the Redress Reforms (No 2) Instrument 2026 (FOS 2026/6). They sit alongside the Financial Services and Markets Bill, which would adapt the fair and reasonable test and create a referral mechanism to the FCA. As at 16 September 2026, the Bill is before the House of Commons.
The key dates are:
1 October 2026: new dismissal grounds apply to complaints referred from this date, and the DISP 3.6.4R clarification takes effect.
October 2026: registration pilots begin with fraud and scams casework.
Later in 2026: a consultation on case fees and the first joint FOS and FCA thematic review, according to the FOS's modernising the redress system page.
April 2027 at the earliest: registration stage rules.
Key Changes Under the New Rules
A Restructured Dismissal Framework
Complaints referred before 1 October 2026 remain under DISP 3.3.4AR. Complaints referred from that date fall under a new rule, DISP 3.3.4C R, with nine grounds supported by guidance in DISP 3.3.4D G. Every ground is discretionary and must take account of vulnerability and reasonable adjustments. The FOS notes that, of more than 225,000 complaints resolved in 2024/25, just over 1,000 were dismissed, and it will report on the new framework after its first year.
Dismissal Where a Firm Has Already Reviewed the Complaint
For firms, the most significant ground allows dismissal where the firm reviewed the subject matter in line with the regulatory standards for such reviews, or formal FCA or other regulatory requirements, standards or guidance, unless it failed to address the particular circumstances of the case. A related ground covers redress determinations under a statutory consumer redress scheme.
The limits matter. The ground will not cover firm-led redress exercises, reviews of a different subject matter, or reviews that did not comply, or only partly complied, with the regulator's standards. The FOS has also rejected calls to make it mandatory. In our view, the ground will only be as useful as the firm's evidence that its review was complete and compliant.
Finality, Parallel Processes and Court Proceedings
The existing power to dismiss complaints already considered by the FOS now refers to new factual evidence, so fresh argument or later regulatory developments should not reopen a case, although genuinely new facts will still be considered, particularly in fraud and scams. A new ground covers issues dealt with, or being dealt with, by a comparable scheme or a regulatory or law enforcement body, with no blanket application. The court-related grounds are consolidated, including matters better suited to court, such as claims for declaratory relief.
Scope Boundaries Restored
Three boundaries removed in 2015 return: employment matters raised by a firm's employees, complaints purely about investment performance, and a firm's discretion under a will or private trust. The FOS describes these as narrow; a performance complaint that also alleges unsuitability is not caught. Firms should not treat these grounds as a reason to shorten their own investigations.
Joint Complainants, Behaviour and Vulnerability
Dismissal where not all eligible complainants have consented becomes a standalone ground, accounting for around 15% of current dismissals on the FOS's sampling. Dismissals involving coercion or economic or domestic abuse require senior agreement. A new ground for complainants who act vexatiously, abusively or otherwise unreasonably is a last resort: in 2024/25, the FOS issued 134 final-stage behaviour warnings, just under half involving vulnerable complainants.
"Other Compelling Reasons" and the Six Examples
A residual ground allows dismissal for other compelling reasons. DISP 3.3.4D G gives six non-exhaustive examples, kept as guidance rather than rules:
no financial loss, material distress or material inconvenience;
no reasonable prospect of success;
a fair and reasonable offer that remains open;
a full and final settlement concluded with knowledge of the right to refer to the FOS;
the legitimate exercise of the firm's commercial judgment; and
compensation sought that significantly exceeds the award limit in DISP 3.7.4R.
The only change from consultation is the removal of "material" before financial loss, after the FOS accepted it could indirectly discriminate. Settlements accepted under duress, or without understanding because of vulnerability, should not bar a complaint, and these decisions will initially be reserved to senior decision makers. Because the fourth example depends on the customer knowing of their referral right, settlement wording and records deserve attention.
Procedural Powers and Case Fees
The FOS may again dismiss, as well as treat as withdrawn, complaints where the complainant fails to provide information or meet time limits, and no longer needs complainant consent to refer a complaint to another scheme. Around 23,000 cases were withdrawn or abandoned in 2024/25. The "chargeable case" definition is amended so that complaints dismissed on receipt under the new grounds are generally not chargeable.
The Fair and Reasonable Test: Clarified, Not Rewritten
From 1 October 2026, DISP 3.6.4R will make clear that relevant law, rules, guidance, codes of practice and good industry practice are assessed as they stood at the time of the act or omission. As a clarification of existing practice, it applies to all current and future complaints. The FOS has not removed good industry practice, preferring to await Parliament's scrutiny of the Bill, so firms should not assume it has ceased to matter.
The Registration Stage: Confirmed but Deferred
Three quarters of respondents (75%) broadly supported a registration stage. The FOS says it will change when information is provided, not what is required. Where information arrives late, complaints take over three weeks longer on average to reach a first assessment. Firms should expect earlier, more structured requests for case files, starting with fraud and scams.
Key Themes for Firms
Three broader messages run through the policy statement:
Finality depends on evidence: several grounds only help firms that can show what they did.
Discretion remains central: dismissal should not be assumed.
The position is interim: the Bill, case fees and registration rules will bring further change.
What Should Firms Do Now?
For most firms, a targeted review rather than a rebuild will be sufficient. The rules change the FOS's procedures rather than firms' obligations under DISP 1, but they affect how firms' work is judged. Proportionate steps include:
Brief the complaints function and the senior manager responsible for complaints oversight before 1 October 2026.
Review final response, offer and settlement letters so that FOS referral rights are clearly explained.
Check that records of past reviews and remediation show the scope, the standard applied and how individual circumstances were considered.
Make sure complete case files can be produced quickly for earlier FOS information requests.
Confirm that vulnerability arrangements in complaint handling remain effective, including under the Consumer Duty where it applies.
Add FOS referrals, dismissals, outcomes and case fees to complaints MI and the compliance monitoring plan.
Train complaint handlers so that FOS dismissal grounds are not mistaken for a reason to investigate less thoroughly.
Monitor the Bill and the case fees consultation, and record key interpretive decisions.
Frequently Asked Questions
When do the new FOS dismissal rules come into force?
The new dismissal grounds in DISP 3.3.4C R apply to complaints referred to the Financial Ombudsman Service on or after 1 October 2026. Complaints referred before that date continue to be handled under the existing grounds in DISP 3.3.4AR.
Can the Financial Ombudsman Service dismiss a complaint a firm has already reviewed?
Yes, where the firm reviewed the subject matter in line with the applicable regulatory standards or formal FCA or other regulatory requirements and addressed the particular circumstances of the case. The power is discretionary and does not cover firm-led redress exercises.
Has good industry practice been removed from the fair and reasonable test?
No. The Financial Ombudsman Service has kept good industry practice in DISP 3.6.4R while the Financial Services and Markets Bill passes through Parliament. From 1 October 2026, the rule clarifies that the relevant standards are those in place at the time of the act or omission.
When will the FOS registration stage be introduced?
The registration stage has been confirmed in principle, but its rules are deferred until after a consultation on case fees later in 2026. The FOS's Equality Impact Assessment indicates April 2027 at the earliest, with pilots in fraud and scams casework from October 2026.
Do firms need to change their own complaint handling?
The reforms amend the Financial Ombudsman Service's procedures rather than firms' obligations under DISP 1. However, firms should review final responses, settlement wording, records of past reviews and complaints management information so they can respond effectively.
How Compliance Angle Can Help
Compliance Angle helps FCA-regulated firms review complaint handling in light of the Financial Ombudsman Service reforms. Relevant support includes:
gap analyses of complaints policies and customer communications through our FCA compliance frameworks and policies service;
Consumer Duty support where complaints and vulnerability data inform outcomes monitoring;
complaints file reviews and MI testing through ongoing compliance support;
board reporting on complaints risk through FCA risk management and governance support;
compliance training for complaint handlers; and
complaints procedures for applicants through FCA authorisation and application support.
Our support is proportionate to each firm's business model, permissions, size and regulatory risk. To discuss how these changes affect your firm, please contact us at info@complianceangle.co.uk.
Source: Financial Ombudsman Service, Modernising the Redress System: policy statement, published 11 August 2026, including the Redress Reforms (No 2) Instrument 2026 (FOS 2026/6).
