11.4 Complaints Handling, DISP and the Financial Ombudsman Service

Regulatory Requirements for Handling Complaints

The FCA's Dispute Resolution: Complaints sourcebook (DISP) is the principal rulebook for complaint handling by authorised firms. DISP sits inside the FCA Handbook and applies to insurers, intermediaries and all FCA-authorised firms. Its rules are enforceable like any other Handbook rule, and failure to comply can attract FCA enforcement and personal accountability under the SM&CR.

The Firm's Internal Procedures

DISP requires every firm to put in place and operate internal complaint-handling procedures. At a high level, the procedures must:

• acknowledge a complaint promptly (in writing, normally within five business days of receipt);
• investigate the complaint fairly and impartially, with sufficiently senior staff and access to the relevant records;
• issue a final response within eight weeks of receiving the complaint (eight weeks is the outer limit, not the target — many straightforward complaints should be resolved sooner); and
• where the complaint is not resolved within eight weeks, issue a summary resolution letter explaining the firm's position and the complainant's right to refer the matter to the Financial Ombudsman Service (FOS).

Exam figure: The eight-week period for the final response runs from receipt of the complaint by the firm, not from the event complained of. If the firm cannot complete its investigation within eight weeks, it must write to the complainant explaining the delay and remind them of their right to refer to the FOS.

The Right to Refer to the FOS

At the end of the process — whether the firm upholds, rejects, or makes a partial offer — the firm must inform the complainant in writing of:

• the outcome of its investigation;
• the complainant's right to refer the complaint to the Financial Ombudsman Service if they remain dissatisfied; and
• the time limit for doing so — generally six months from the date of the firm's final response, or from the date of the summary resolution letter where the complaint was not resolved within eight weeks.

If the complainant does not refer within six months, they generally lose the right to use the FOS for that complaint (though they may still go to court). The six-month time limit is the single most examined figure in DISP.

The Financial Ombudsman Service (FOS)

The Financial Ombudsman Service (FOS) is an independent, statutory dispute-resolution service set up under FSMA 2000 (sections 225 to 234). It is the official complaints body for the UK financial services industry. Its key features are:

• Independent. The FOS is not part of the FCA or of any firm; it operates at arm's length from the regulator, although the FCA appoints its board and sets its rules in DISP.
• Free to the complainant. There is no charge to the consumer for using the FOS, regardless of the outcome. The cost is met by levies and case fees on the firms the FOS covers.
• Statutory. The FOS's jurisdiction and powers are set by FSMA and by the FCA's DISP rules. It is not a voluntary scheme.
• Covered firms. The FOS covers eligible complaints about FCA-authorised firms (and certain other firms such as credit unions and, in some cases, claims management companies). Insurance complaints against insurers and intermediaries are within scope.
• Eligible complainants. Consumers, micro-enterprises, small charities and small trusts are eligible complainants. Most insurance complaints are brought by individual consumers.

The FOS Award Limit

The FOS can make a binding award requiring the firm to pay compensation to the complainant. The award is subject to a maximum award limit that the FCA sets and adjusts annually in line with inflation (measured by the Consumer Prices Index — CPI), rounded down to the nearest £5,000.

From 1 April 2026, the limits are:

The two-track limit was introduced in 2019 when the FOS's jurisdiction was extended to larger SMEs; the higher track applies to complaints about the firm's conduct from 1 April 2019 onwards. For complaints about conduct before that date, the lower track applies. The limits are reviewed each year and adjusted by 1 April.

Trap for candidates: Do not confuse the FOS award limit with the Small Claims Limit in the county court, or with the FOS's eligibility thresholds for complainants. The £455,000 figure is the maximum the FOS can require the firm to pay for acts on or after 1 April 2019; for older acts, the limit is £205,000. Both figures are adjusted annually.

How the FOS Decision Works

A FOS decision is binding on the firm if the complainant accepts it. The firm must pay any award the FOS makes within the award limit, and the FOS can name and shame firms that do not comply. Importantly, the decision is not binding on the complainant: the complainant is free to reject the FOS decision and go to court instead. This asymmetry is deliberate — the FOS is a free, accessible alternative to litigation, but the complainant retains the right to have the dispute decided by a court if they prefer. If the complainant accepts the FOS decision, the firm is bound and the matter is concluded (subject to judicial review on a point of law).

The Relationship Between DISP, the FOS and the Courts

The complaint-handling architecture is layered:

1. Internal. The firm investigates the complaint under its DISP-compliant procedures and issues a final response within eight weeks.
2. Ombudsman. If the complainant is dissatisfied, they may refer to the FOS within six months of the final response. The FOS investigates and can make a binding award up to the applicable limit.
3. Court. The complainant can instead (or additionally, if they reject the FOS decision) take the dispute to court. Court proceedings are subject to the civil limitation periods (generally six years for contract, with the long-stop under the Latent Damage Act 1986 for negligence).

The FOS route is generally quicker, cheaper and less formal than court, and is the normal route for individual consumer complaints about insurance claims handling, mis-selling, premium disputes and similar issues.

Key Takeaways

• The FCA's DISP sourcebook requires firms to have internal complaint-handling procedures, to acknowledge complaints promptly, to investigate fairly, and to issue a final response within eight weeks.
• The complainant must be informed of their right to refer an unresolved complaint to the Financial Ombudsman Service (FOS), generally within six months of the firm's final response.
• The FOS is an independent, free-to-the-complainant statutory dispute-resolution service set up under FSMA 2000 that covers eligible complaints about FCA-authorised firms.
• From 1 April 2026 the FOS can require a firm to pay up to £455,000 for complaints about acts or omissions on or after 1 April 2019, and up to £205,000 for acts before that date.
• A FOS decision is binding on the firm if the complainant accepts it, but the complainant is not bound and retains the right to go to court instead.