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Complaint Handling Update

  • United Kingdom
  • Financial services disputes and investigations


On 29 March 2019 the Financial Ombudsman Service published its strategic plans for 2019/2020 (the Report). The Report also looks beyond next year and considers how FOS will need to evolve by April 2025, when the complaint handling landscape, post PPI timebar, is likely to look very different.

In this briefing, we review the key provisions of the Report and consider the wider developments in complaint handling on the horizon. 

Key provisions of the Report


Points of interest

Volume of complaints

In 2019/2020, FOS expect to receive 460,000 complaints, the highest demand for five years and a 13% increase from prior year. That is driven in part by FOS’s new significant responsibilities for SMEs and CMC complaints


PPI accounts for less than 50% of the complaints FOS expects to receive for the first time in eight years with 250,000 complaints expected for 2019/2020. That takes into account the surge expected as the PPI deadline approaches. 

Short term lending

FOS expects to receive 50,000 complaints about short term lending. The consultation document makes clear that the focus is on affordability. This year, the consultation  noted an approximate uphold rate of 50% with 80% of complaints coming from CMCs.

Broader remit

FOS estimate that 1,300 complaints will be made by approximately 210,000 small businesses who would not previously have had access to its service and 1,600 will be about CMCs following FOS taking responsibility from the Legal Ombudsman for handling such complaints.

New case management tool

FOS has been developing and piloting its new case management tool called Phoenix. It will enable the sharing of information in a secure way with FOS and provide the ability to monitor progress of a complaint. 


FOS will freeze the case fee at £550 for the 26th and subsequent complaints but the levy will be increased to fund the new jurisdictions and to deal with the increase in general casework. 


New trends include complaints related to IT outages and to banking fraud and scams, particularly following the extension of FOS remit to enable it to consider the actions of the recipient bank. See our article New FCA rules mean complaint handling extended to ‘receiving payment service providers’. Mortgage complaints are also increasing.

Extension to FOS access for small and medium-sized enterprises (SMEs)

The new rules extending access to FOS for SMEs came into force on 1 April 2019. The rules set out the new eligibility criteria for SMEs, as well as charities, trusts and micro-enterprises, to refer complaints to the FOS. The extended jurisdiction means that SMEs with an annual turnover of less than £6.5million which employ fewer than 50 people or have a balance sheet total of less than £5 million can make a complaint to FOS. The FCA expects that these new rules will allow around 210,000 SMEs to access FOS’s services.

The potential volume of additional complaints led to concerns, voiced by Richard Lloyd in his independent review report published in July 2018, that FOS has insufficient capacity to deal with such an increase in casework. To counter those concerns, the Report confirms that SME work will have its own identity and will be dealt with separately from the day-to-day complaint handling work with a distinct phone line and microsite. The specialist teams will have access to legal and actuarial support, enhanced analytics tools and a range of dispute-resolution approaches to ensure fairness in their decisions. A specialist professional practice group will develop the service’s approach to complaints involving SMEs to seek to achieve consistency and identify trends. 

This is the most significant change to FOS’s jurisdiction for several years and will result in a substantial increase in business related complaints handled by FOS. FOS has estimated it will receive an additional 1,300 complaints per year but that seems low given the additional number of potential complainants and the fact that the FCA intends to work with membership bodies to raise awareness among the newly eligible complainants of their right to refer a complaint to FOS. Whereas previously, SME complainants could have pursued such complaints through the courts, many will have been deterred by the sizeable issue fee. Access to FOS is free.

A post-implementation review of the new rules is expected to commence by 1 April 2021.

Extension of FOS jurisdiction for authorised push payment (APP) frauds

On 14 December 2018, the FCA published PS18/22.  APP fraud is where a fraudster tricks a payer into making an APP to an account controlled by that fraudster. This differs from other kinds of fraud, such as where a fraudster steals money from an account without the owner of the account knowing, because in APP, the account owner authorises the payment, albeit under false pretences.

The changes require payment service providers (PSPs) to handle complaints about alleged fraud relating to funds they have received as a result of APPs in line with DISP and to allow eligible complainants to refer these complaints to FOS.  This enables FOS to consider the actions of both the sending and receiving banks in any fraudulent transaction. The new rules came into effect on 31 January 2019.

Regulation of Claims Management Companies and FOS’s new role

The FCA took responsibility for claims management regulation on 1 April 2019 under the Financial Guidance and Claims Act 2018. It published Policy Statement 18/23 on 17 December 2018 setting out the conduct, rules and fees applicable to CMCs from 1 April 2019. The changes will drive higher standards across the CMC industry and are intended to address the harm to customers highlighted in the Brady Review, the Financial Lives Survey and reports produced by the CMR and Legal Ombudsman. The FCA is keen to create a level playing field for CMCs so that those who become authorised all meet the higher standards and those who cannot do so, stop trading. The aim is to have an effective CMC market that can hold firms to account in an appropriate way.

In the final Claims Management Regulation Bulletin before regulation moved to the FCA, the government highlighted some concerns it has with recent practice of increased use of Data Subject Access Requests by CMCs. It asks that CMCs consider whether an alternative method of obtaining the information is available to avoid holding vast amounts of its clients’ personal data. It also requests that CMCs carefully consider the scope of the Letter of Authority which clients are asked to sign as it is evident many clients have not understood the type of complaint being pursued. That has had the impact of some complaints subsequently being withdrawn. 

At the same time, FOS became responsible for handling consumer complaints about CMCs and CMCs will become subject to the rules in DISP. Like the SME work, FOS has set up a distinct identity for CMC work. Case handlers and ombudsman from the Legal Ombudsman have moved to FOS to seek to ensure a smooth transition. There is also a specific customer journey for people complaining about CMCs, separate from the existing casework process.

Increase in FOS award

From 1 April 2019, the current limit of £150,000 increased to £350,000 for complaints about actions by firms on or after that date. For complaints about actions before 1 April referred to FOS after that date, the limit will rise to £160,000. The changes were confirmed in PS19/8.

It was estimated that FOS receive around 2,000 higher value complaints per year, typically concerning long term investments, larger commercial loans and insurance products. The FCA accepts the limitations of the data and have reduced the estimates following further work to around 500 complaints a year, 75% of which would fall within the new award limits.

A key concern in the feedback is the impact on the cost and availability of PI insurance particularly concerning defined benefit pension scheme transfers. The FCA accepts this risk but considers the market would still be big enough to service such advice even if there are some exits and that the same advisers could still operate in other areas of advice.

Feedback included the suggestion that higher value complaints should automatically involve an oral hearing. The FCA points to the option of an oral hearing being available but does not consider that it should be mandatory, partly because such a change would require a rule change and a further formal consultation. Instead, FOS will publish governance arrangements to ensure proper consideration of the need for an oral hearing.

Feedback also suggested that an appeal should be available for higher value complaints. The FCA point to an equivalent Ombudsman scheme in Australia with a £600,000 limit (A$1m) which also has no appeals process.

Some respondents felt that the court is a more appropriate forum for higher value complaints. The FCA points to downsides of using the courts such as cost and delay but states that FOS will publish further guidance on when it would be more appropriate for a complaint to be handled by the courts.

Alternative Dispute Resolution for SMEs falling outside FOS’s extended jurisdiction

The Walker Review, commissioned by UK Finance to undertake an independent review into dispute resolution procedures for the SME market, was published in October 2018 (the Review). The Review made a series of recommendations to improve access to ADR for SMEs. UK Finance published an industry response in November 2018 which set out four key proposals:

  • Support the FCA’s proposed extension of FOS for SMEs in April this year;
  • A voluntary ombudsman scheme to support larger businesses (with a turnover between £6.5 million and £10 million and a balance sheet of £7.5 million) that are not ‘eligible complainants’ to FOS; and a separate voluntary scheme to consider legacy SME-bank disputes that arose following the 2008 Global Financial Crisis and have not been eligible for other forms of dispute resolution
  • Real time data links the SME unit within FOS, the FCA and key government departments to provide advance warning of potential issues
  • A formal process, supported by senior representatives of the major banks, that seeks to achieve reconciliation and closure where they meet a representative sample of affected SMEs, listen to and acknowledge the loss experienced by those businesses and commit to a new system of dispute resolution and other measures to ensure past issues do not infect their future relationship

The industry has agreed to support and fund an interim voluntary process by September 2019. A steering group on that point has already been set up, led by Lewis Shand Smith. The All-Party Parliamentary Group on Fair Business Banking has also published a statement outlining its concerns on the UK Finance response. For example, it does not agree that the process for reviewing legacy complaints should be limited to those post 2008. Work is now underway to establish the new voluntary resolution process.  More information is expected to be available in the next few months.

Actions arising out of Richard Lloyd’s Independent Review

FOS responded in December 2018 to Richard Lloyd’s Independent Review, which outlined numerous steps which FOS is taking to address the concerns identified. That includes a significant focus on the expertise of FOS staff. For example, 60 new pieces of guidance have been added to FOS’s internal “Discovery” knowledge tool in the last six months and casework structures have been revised so that recognised experts lead each subject area.

FOS is also considering further investment in data analytics and machine learning tools to enhance the consistency of casework and quality assurance. An updated whistleblowing procedure has also been put in place from January 2019.

What does this mean for you?

Complaint handling remains high on the FCA agenda as it is seen as a barometer of the culture of the firm. FOS will continue to share concerns with the FCA and systemic issues are likely to lead to remediation.  

FOS is entering a period of significant change, driven by the substantial increase in its award limit, the PPI deadline, taking on a broader role for SME lending and dealing with complaints about CMCs. The wider complaint handling landscape will also change considerably when the voluntary dispute resolution process for larger SMEs goes live in September 2019.  Firms will need to monitor the impact of all of these changes and be ready to provide feedback to FOS and the FCA where issues arise.