The King’s Speech last week overlooked a proposed bill that would significantly weaken the Financial Ombudsman Service (FOS), according to a leading academic who has criticised the government for accepting industry claims without independent scrutiny. The Enhancing Financial Services Bill, described by ministers as a “once-in-a-generation opportunity” to reform the UK’s financial regulatory regime, includes a package of changes that campaigners and experts warn will tilt the balance away from consumers and towards the finance industry.
How the bill would change the ombudsman
The government says the reforms are intended to return the FOS to its “original role as a fast, impartial complaints body”. In practice, the bill introduces a two-stage complaints process, with a new “pre-registration” stage requiring complainants and firms to provide specific information within set timeframes before a case can be allocated to a caseworker. The Ombudsman will also gain new powers to dismiss complaints that are better resolved through other means, more appropriate for courts, or where there has been no material financial loss, distress or inconvenience.
A key change targets the existing “fair and reasonable” test, which some in the banking and insurance sectors have criticised for its perceived unpredictability. The test is being revised to narrow discretion, although it will remain a structured framework rather than a purely rules-based system. Consumer groups have warned this could limit the FOS’s ability to tailor decisions to individual circumstances.
The bill also mandates closer collaboration between the FOS and the Financial Conduct Authority (FCA), with the FCA potentially given powers to direct the ombudsman in certain cases, particularly where a decision could have wider implications. The Chief Ombudsman will assume overall responsibility for determinations, but their appointment will require Treasury approval, and both the Chief Ombudsman and the Chair of the FOS will become government appointments. A ten-year limit for bringing complaints to the FOS is also being introduced.
The reforms come amid a surge in complaints. The FOS received 305,726 complaints in the 2024/25 financial year – the highest in six years – driven by issues including motor finance commission, irresponsible lending and fraud. The motor finance scandal, in particular, has been a major driver of the changes, with the FCA having already paused complaint handling and proposed a redress scheme. Hire purchase on motor vehicles became the most complained-about product in 2024/25, with 76,160 cases.
Industry lobbying and influence
Critics argue the proposals are the product of intense lobbying by the finance industry rather than a considered attempt to improve consumer protection. Iain Ramsay, emeritus professor of law at the University of Kent, wrote that the changes are “cloaked in the guise of ‘modernisation'” but “reflect pure interest-group lobbying by the finance industry, which already exercises substantial influence on policy”. He noted that because the costs of consumer redress are concentrated in a few large firms, those firms have a strong incentive to participate in the policy process, while consumers – who have diffuse concerns, limited expertise and face high organisational costs – have far less influence.
The Transparency Task Force, a campaign group, has also expressed concern that intense industry lobbying could tilt the balance away from consumers and toward firms. Reports indicate that financial lobbyists hold significant sway in developing policy, backed by substantial resources, and that civil society groups report having less access to ministers than their industry counterparts. Concerns have been raised that “regulatory cooperation” between the EU and UK – favoured by the industry – could lead to decision-making dominated by lobbyists through opaque forums.
The Treasury’s consultation response, published on 16 March 2026, and a joint FOS-FCA consultation that closed on 11 May 2026, both preceded the bill’s announcement. The government has stated that the reforms will “restore clarity to the financial services redress system” and provide “greater certainty for consumers and firms”. But consumer groups such as TISA have warned against changes that might exclude vulnerable consumers who need help the most, while victims of domestic and economic abuse could be blocked from redress if a partner refuses to cooperate.
Lack of independent evidence
Ramsay’s letter, published in the Guardian on the day of the King’s Speech, accused the Treasury of failing to subject the proposals to proper independent scrutiny. “One might expect … that independent empirical and social science evidence would play a key role for the government in assessing reform proposals,” he wrote. “Yet this did not occur here, and indeed the Treasury seemed to accept without question industry claims concerning the FOS, making little attempt to assess reviews of its work or explore its role in the financial regulatory system.”
The enhancing financial services bill builds on the Financial Services and Markets Act 2023, which introduced a “competitiveness and growth objective” for regulators and revoked retained EU law. The new bill also includes plans to merge the Payment Systems Regulator into the FCA and to reduce the burden of the Senior Managers and Certification Regime by 50%. Ramsay concluded that, given the lack of evidence-based policymaking, the likely outcome is “at best an exercise in accidental wisdom”.
