The Financial Ombudsman Service (FOS) is consulting on changing its case fee structure which would see businesses pay less for complaints which are resolved earlier in the investigation process.
FOS says previous feedback from stakeholders had called for it to differentiate its case fees for businesses, adding that the new proposals would "better reflect the effort and the cost we incur investigating cases and could support the early resolution of complaints".
Financial firms currently pay a levy to contribute to FOS's costs and also pay a fixed fee of £650 for every case against them it investigates, regardless of the stage at which the dispute is resolved. Since 1st April 2025, if the complaint is submitted by a professional representative and not upheld, this fee is reduced to £475. Most businesses receive three free cases a year.
The current model means all business pay the same, regardless of the stage the case reaches and how much work goes into resolving the dispute. Some businesses believe this is unfair when they are settling complaints earlier in the process.
The new consultation is seeking views on the proposal that businesses’ case fees are differentiated based on the stage at which a case is resolved. Complaints that are closed later in the process require more work and therefore cost more than those which are resolved earlier.
FOS is also consulting on whether case fees should be differentiated based on complaint outcome.
Previous feedback from stakeholders has called for a stronger “polluter pays” model where firms found to have done something wrong contribute more towards costs. This option would see firms pay less if FOS feels they have already resolved the dispute fairly themselves.
In 2024/25, seven in ten businesses whose customers referred complaints to FOS did not pay any case fees at all.
In addition, FOS is seeking views on a change to the free case allowance. The introduction of charging for professional representatives now means the value of free cases can differ. FOS says changing the free case allowance to a monetary value "would allow all respondent businesses and professional representatives to save the same amount of money".
Also included in the proposals is a move to change its payment mechanism to charge the majority of businesses and professional representatives quarterly and in advance. This would be based on a forecast of case volumes, with a mid-year check and end of year adjustment for accuracy. This would give the Service the funds required to work cases while also ensuring business and representatives have a more predictable cash flow through the year.
The consultation comes alongside two other consultations being run by HM Treasury and by the FCA and the Financial Ombudsman to look at ways to modernise the redress system.
All consultations will close on 8th October 2025.
Jenny Simmonds, interim chief executive of FOS, said: "We are undertaking an ambitious transformation programme to reform our service and make it work for today’s economy.
"These proposals are seeking to modernise our charges for businesses, creating a fairer funding model that is fit for the future, and which better reflects our work, while ensuring our service remains free to consumers who bring their cases directly to us.”
