The Financial Ombudsman Service will be reformed so more cases can be dismissed and either thrown out or resolved by other means, for example by the courts.
There will be a time limit of 10 years for complaining to the FOS, while the FCA will be given the powers to deal with ‘mass redress events’.
The changes form part of a Financial Conduct Authority (FCA) consultation which closes on May 11.
The government said the intention is to turn the ombudsman to a simple, impartial dispute resolution service, amid worries the body has acted as a “quasi-regulator” in some instances.
James Dipple-Johnstone, interim chief ombudsman at the FOS, said: “The financial sector has changed significantly since the Financial Ombudsman was set up 25 years ago, which is why we are driving forward changes to transform the redress system.
“We are laying the foundations for an agile, responsive and modern service which is fit for the future and has the confidence of consumers and firms alike.”
There will also be a registration stage to make sure complaints are ready to be investigated before being allocated to a caseworker.
The government will also introduce a range of reforms, including a referral mechanism between the FOS and the FCA. This will become relevant if there are ambiguities in FCA rule requirements, or if an issue raises wide implications across the financial services sector.
The chief ombudsman will be handed overall responsibility for FOS determinations, in an attempt to make decisions more consistent.
The FCA and FOS will be required to publish regular thematic reports to clarify how the FOS will consider certain types of complaints.
Lucy Rigby, economic secretary to the Treasury, said: “These reforms to the Financial Ombudsman Service will make redress clearer, more consistent and easier to navigate.
“By setting clearer boundaries, we are restoring confidence in the system and ensuring it works fairly and predictably for consumers and businesses alike.”
