9.4 Complaint Handling and the Financial Ombudsman Service

9.4 Complaint Handling and the Financial Ombudsman Service

Even well-run firms receive complaints. How a firm handles them is itself a regulatory matter, governed by the FCA's Dispute Resolution: Complaints Sourcebook (DISP). The DISP framework aims to ensure complaints are handled fairly, promptly and consistently, with a clear right of referral to an independent adjudicator — the Financial Ombudsman Service (FOS).

What Counts as a Complaint?

DISP 1.1 defines a complaint as any expression of dissatisfaction — oral or written — about the provision of (or failure to provide) a financial service. A complaint is eligible if it relates to an activity that is, or ought to be, regulated by the FCA, and is brought by an eligible complainant — broadly a consumer, a micro-enterprise, a charity with income under £1m, or a trustee of a trust with assets under £1m.

The DISP Time Limits

If the firm does not provide a final response within eight weeks, the complainant can refer the complaint to the FOS without waiting.

Final Response Letter

A final response must:

• Summarise the complaint and the firm's investigation.
• State whether the firm upholds the complaint, in whole or part.
• Offer redress (if applicable), explaining how it will be provided.
• Inform the complainant of their right to refer the complaint to the FOS within six months, and enclose the FOS explanatory leaflet.
• Indicate whether the firm consents to waive the time limits in DISP 2 for the complainant.

The Financial Ombudsman Service (FOS)

The FOS is the independent dispute resolution body for financial services. It is funded by levies on the industry and case fees. Its purpose is to resolve disputes between firms and eligible complainants quickly and with minimum formality.

Jurisdiction

FOS has three jurisdictional schemes:

The Award Limits

The maximum amount the FOS can require a firm to pay is set by the FCA and reviewed annually. From 1 April 2026:

The limits apply to complaints referred to the FOS on or after 1 April 2026. Awards above the limit can still be recommended but cannot be required by the ombudsman; the complainant retains the right to accept or pursue the balance through the courts.

The Adjudication and Ombudsman Stages

1. Adjudicator: A FOS case handler investigates, may ask the firm and the complainant for evidence, and gives an initial decision.
2. Ombudsman: Either party can ask for the case to be reviewed by an ombudsman, who issues a final decision. The decision is binding on the firm if the complainant accepts it; otherwise, it is not binding on either party.

The complainant is not obliged to accept the decision and can take court action instead. The firm cannot appeal a final decision simply because it disagrees — it has no general right of appeal, although it can seek judicial review on a point of law.

CONC and Specialist Complaints

The Consumer Credit sourcebook (CONC) contains additional complaint-handling requirements for firms operating under consumer credit permissions. For example, CONC 7 sets out additional time limits and information requirements for debt collecting complaints. The DISP rules apply alongside CONC.

Alternative Dispute Resolution (ADR)

Firms must signpost the availability of Alternative Dispute Resolution (ADR). Although the FOS itself is the principal ADR body for financial services, the FCA requires firms to inform complainants of their right to use ADR. The FOS represents the ADR option for the financial sector under the ADR Regulations 2015.

Practical Compliance Checklist

• Maintain a complaints register recording each complaint's date, nature, handling and outcome (DISP 1.9).
• Train front-line staff to recognise complaints — a verbal gripe to a call handler is a complaint, even if the customer does not use the word.
• Set diary reminders for the 3rd business day summary resolution and the 8-week final response deadline.
• Provide the FOS leaflet and a clear FOS referral rights paragraph in every final response.
• Track patterns in complaints data for the firm's Consumer Duty outcomes monitoring and CMOR submissions.

Vulnerable Complainants and CONC 7

Firms must pay particular attention to vulnerable complainants — those who, due to health, life events, resilience or capability, may find it harder to engage with the complaints process. DISP does not relax the eight-week deadline for vulnerable complainants, but firms should make reasonable adjustments such as accepting complaints through multiple channels, providing extra time to respond to requests for information, and signposting specialist support. The FCA's Consumer Duty amplifies these expectations: firms must evidence that vulnerable customers achieve outcomes as good as those of other customers.

CONC 7 applies specifically to debt collection complaints. It sets shorter turnaround times for some acknowledgement steps and requires firms to pause collection activity where a complaint about the debt is unresolved. Firms operating both consumer credit and investment permissions must apply DISP alongside the relevant CONC chapters.

Reporting Complaints Data

Complaints data feeds two important regulatory streams. First, the firm's CMOR return (under SUP 16) provides the FCA with quantitative data on complaints volumes, upheld rates and redress paid. Second, under the Consumer Duty, firms must report on outcomes monitoring — using complaints data as one of four key indicators (alongside customer service, retention and product performance). A rising complaints trend on a specific product is a red flag requiring action, not just a record-keeping entry.

Effective complaint handling is not just a regulatory obligation — it is a critical feedback loop that protects customers and improves products.