From consultation to implementation
The Policy Statement marks the latest instalment in a reform programme that began with the FCA and FOS Call for Input on modernising the redress system in November 2024 and accelerated following HM Treasury's review of the FOS and the first FCA/FOS consultation in July 2025.
The FOS will proceed with the development of a registration framework intended to improve the handling and triage of complaints at an earlier stage. While further work is required on operational design and case-fee arrangements, the objective is clear: a more structured front-end process capable of identifying cases that can be resolved, redirected or filtered before entering the full FOS process.
The FOS is also proceeding with expanded dismissal powers. One notable refinement to the consultation proposals is the removal of the materiality qualification in relation to financial loss. As a result, dismissal on this ground will only be available where there is evidence that the complainant has suffered no financial loss, material distress or material inconvenience.
The changes to the dismissal grounds take effect on 1 October 2026. The registration framework will follow separately, after further work on its design, case-fee arrangements and testing. Together, these measures are intended to introduce greater procedural discipline into the complaints process, improve efficiency and give firms a clearer understanding of how complaints will progress through the system.
The procedural changes in the Policy Statement are important, but they form only part of the reform package. The more difficult questions concern the standards the FOS applies when determining what is fair and reasonable, the respective roles of the FOS and FCA in defining those standards and the potential for hindsight-based decision-making to cause major uncertainty for firms.
Historic conduct – a clearer reference point for firms
A welcome development for firms is the amendment to DISP 3.6.4R. The revised rule clarifies that complaints should be determined against the standards that applied at the time of the act or omission being complained about. This is intended to address one of the most persistent criticisms of the modern redress framework: the perception that historic conduct could be assessed through the lens of subsequent regulatory developments or evolving expectations.
The amendment is a clarificatory rather than a substantive change, but the signal it sends is obviously helpful for firms. Notably, this does not yet, however, create a safe harbour for firms that complied with the letter of the rules while falling short of broader standards relevant to the FOS’s assessment – this being a point that the FSM Bill will address (see below).
Good industry practice – the unresolved question
The FOS has decided to retain references to good industry practice within the fair and reasonable framework while it awaits developments in the FSM Bill. The Bill completed Committee stage in the House of Lords in July 2026 and is due to begin Report stage on 7 September 2026. Its provisions may therefore change as it continues through Parliament.
This issue, of course, sits within the wider policy debate. Many firms argued that good industry practice creates uncertainty. Consumer groups and charities took a different view. They argued that removing good industry practice could constrain the FOS's ability to reach fair outcomes, particularly in areas where market behaviour evolves more quickly than formal regulation or where consumer harm is not fully captured by existing rules.
Why the Financial Services and Markets Bill matters
The reforms in the Policy Statement must be viewed in the context of the more radical reforms set out in the FSM Bill. The Bill would reshape elements of the statutory framework governing FOS decision-making, strengthen mechanisms for FCA involvement in issues with wider market implications and create additional tools for addressing mass redress events through coordinated regulatory action.
In particular, the Bill would adapt the statutory basis of the fair and reasonable test so that, where a firm has complied with relevant FCA rules, the FOS must treat it as having acted fairly and reasonably. It would also introduce formal referral mechanisms for questions about the interpretation of FCA rules and matters with wider implications.
The common thread running through these proposals is a greater role for the FCA in shaping how market-wide conduct standards are interpreted and applied. Historically, firms have perceived a disconnect between FCA expectations, FOS decisions and market understanding of regulatory standards. The FSM Bill seeks to address that disconnect through a greater role for the FCA in interpreting and communicating applicable regulatory standards.
That does not mean that discretion will disappear. But responsibility for shaping the standards against which firms are assessed would – assuming the amendments operate as intended - increasingly sit with the FCA. For firms, that may prove to be the most significant long-term consequence of the reform programme.
Conclusion
The Policy Statement represents an important step in the evolution of the UK's redress framework, but it is not the end of the reform story. For firms, the real test now lies in implementation. The implementation of the DISP changes, the development of the registration framework, the passage of the FSM Bill, and the operation of the new regime in practice, will show whether the reforms deliver the greater consistency and certainty that industry has long sought.
