What is the Financial Ombudsman Service?

When you take out a mortgage, take out a loan or buy life insurance, you expect the quality of the service you receive to be high and the whole relationship with the finance company to run smoothly. However, things may go wrong - the advice you are given may lead you to make the wrong decision and the content of the advertising leaflet may not reflect reality. Fortunately, you are not alone in these situations - the Financial Ombudsman Service can help you resolve some disputes.

What does the Financial Ombudsman Service do?

The Financial Ombudsman Service resolves disputes between consumers and banks, insurance companies, creditors and lenders, pension, investment and savings funds, pawnbrokers, financial and credit advisers, brokers and credit card issuers.

How does the Financial Ombudsman Service work?

The Financial Ombudsman Service is a free, independent service that settles complaints between consumers and financial businesses. Before you can ask it for help, you must first complain directly to the service provider. The company serving you has 8 weeks to process your request. If this is not done or you are not satisfied with the turn of events, you are entitled to recourse to the authority.

If you accept the ombudsman’s final decision, it is binding on the business, which may have to pay you compensation, correct your credit report or apologise.

Why use the Financial Ombudsman Service?

UK financial law is particularly protective of consumers - regulations are structured to protect you from possible fraud and bad faith on the other side of the transaction. Regulations such as Consumer Duty and the FCA (Financial Conduct Authority) guidelines are designed to make firms put their customers’ needs first and treat them fairly.

While the courts are primarily guided by whether the trader in question has acted in accordance with the law, the ombudsman decides what is fair and reasonable in each case, taking into account the law, regulations, regulators’ rules and guidance, standards and, where appropriate, good industry practice.

It ought to be mentioned, however, that filing a complaint with the FOS does not guarantee a decision that works in your favour - in 2023/24 the Financial Ombudsman Service upheld 37% of the complaints it resolved. The service is independent and impartial, and decides each case on what is fair and reasonable in the circumstances. If you accept a final decision, it is binding on the business. If you do not accept it, you are free to take your case to court instead.

What abuses can be reported to the Financial Ombudsman Service?

You can usually take your complaint to the ombudsman if you think a financial business has made a mistake or treated you unfairly, as long as you have complained to the business first and are within the time limits. Examples of issues you can complain about include:

• Bank account fees

• Frauds and bank account hacking

• Sudden and unjustified changes to fee and commission tables

• Disguised commissions and fees

• Overly aggressive methods of debt recovery

• Unfairly managed investments

• Misleading advice from financial and credit advisers

Remember, the ombudsman won’t help you just because your mortgage instalments go up as a result of rising interest rates or your investments don’t make money - the ombudsman looks at whether the business made a mistake or treated you unfairly.

What if a mortgage broker engages in misconduct?

In the seven years that Extend Finance has been in business, we have never had a situation where it was a customer who was dissatisfied with the level of service.

However, if you feel that the offer or sales service presented to you has infringed your interests, you can use the following procedure:

• Make a complaint to the company serving you - pass on the information by email or letter. Financial service providers have 8 weeks to respond to you.

• Contact the Financial Ombudsman Service - if you are unhappy with the response of the company you are a customer of, you have the right to complain within 6 months of receiving a response. Attach a copy of previous letters and communications to your request. You can find template applications here.

• Await a response from the office - how long this takes varies depending on the complaint.

What amount may I receive?

For complaints referred to the ombudsman on or after 1 April 2026, the maximum award is £455,000 if the act or omission happened on or after 1 April 2019, and £205,000 if it happened before then. The limits are reviewed every year. If the ombudsman upholds your complaint, it can tell the business to put things right, for example by paying a specific amount where your financial loss is clear, or by setting out how the business should calculate your compensation where it is not.

The ombudsman may also tell the business to pay interest to make up for the time you were without your money. The rate depends on the case and the period involved; the Financial Ombudsman Service explains its current approach on its compensation page.

Compensation can be paid to cover material losses (excessive fees, confiscation of assets) as well as moral losses (distress or inconvenience). As a general rule, however, compensation is not intended to be a source of income - its purpose is to compensate you for the losses and damages caused to you by the wrongful actions of a financial industry entity.