Modernising the Redress System - FOS Reforms & DISP Overhaul
CP26/9 proposes sweeping reforms to the Financial Ombudsman Service (FOS) and the DISP rules, aiming to create a faster, more predictable and more transparent redress system, including new ‘case readiness’ standards, revised dismissal grounds and FSCS scope changes.
Context:
The FCA has identified chronic delays, inconsistency, and opacity in the current financial redress system as serious barriers to consumer confidence and industry certainty. CP26/9, which is partly a policy statement finalising certain elements and partly a new consultation, sets out a fundamental restructuring of how complaints are registered, assessed, and resolved.
The paper responds to the FOS's capacity crisis, driven in part by the motor finance caseload and incorporates feedback from both consumer groups and industry on where the current DISP framework falls short. Key themes include reducing mass redress events (MREs), improving FOS throughput, and ensuring complaints are 'investigation-ready' before formal registration.
The FCA has confirmed policy on new FOS dismissal grounds and published updated guidance on identifying and rectifying consumer harm, with particular attention to vulnerable customers. A new 'pre-registration' triage stage is proposed to filter complaints earlier and reduce the burden on the FOS's core casework function.
Rules & Guidelines:
New 'case readiness' standards introduced: complaints must meet defined readiness criteria before formal FOS registration
Revised DISP 3 rules establish a structured framework for pre-registration triage and progression
Amended dismissal grounds give the FOS clearer authority to decline cases that are vexatious, jurisdictionally out of scope, or insufficiently evidenced
Non-Handbook guidance issued on identifying, rectifying, and reporting consumer harm including for vulnerable customers
Firms must provide specific information within clear deadlines at the pre-registration stage
Future consultation signalled on MRE management and on the interface between FOS and potential scheme-based redress
Businesses Affected:
All FCA-authorised firms that are subject to DISP rules and FOS jurisdiction
Financial services firms with high complaint volumes: banks, insurers, mortgage lenders, consumer credit firms
Firms involved in or preparing for mass redress events, including motor finance lenders
Claims management companies (CMCs) whose business model relies on FOS case volumes
The Financial Ombudsman Service itself, which must overhaul its operational processes
FSCS-levied firms, as the policy statement finalises some FSCS scope amendments
Next Steps:
Map current complaints-handling processes against the new 'case readiness' framework to identify gaps
Update DISP compliance frameworks and train complaints-handling teams on the new pre-registration triage rules
Brief boards and risk committees on the FOS reform trajectory and the implications for redress provisioning
For firms with high complaint volumes, model the impact of reduced MRE frequency and changed FOS throughput on operational planning
Engage with FCA's consultation on MRE management when published later in 2026
Financial Conduct Authority, Modernising the Redress System
