New FOS rules help stop surge from claims management companies
The Financial Ombudsman Service (FOS) has reported a marked reduction in the volume of complaints it handled in the first quarter of the 2025/26 financial year, attributing much of the decline to the recent introduction of case fees for claims brought by professional representatives.
Between April and June 2025, the ombudsman processed 68,000 complaints - down from 74,600 over the same period last year. This marks the lowest quarterly total since early 2024 and follows a significant policy shift in April, when the FOS began levying charges on claims management companies (CMCs) and law firms submitting more than 10 cases annually.
Previously exempt from charges, these firms are now required to pay £250 per complaint submitted beyond the first 10, a fee reduced to £75 if the case is upheld. The FOS has described the move as a way to discourage speculative and poorly substantiated cases, which had previously led to a high proportion of withdrawn or abandoned claims.
Professional representatives step back
The change has had an immediate impact. Complaints brought by CMCs and other representatives fell to 30,800 in Q1 2025/26, compared to 36,600 a year earlier. This fall suggests that the new fee structure is compelling firms to adopt a more discerning approach in evaluating the viability of their cases.
James Dipple-Johnstone, Interim Chief Ombudsman, said the changes formed part of a broader overhaul of the UK’s redress system, developed in collaboration with the Financial Conduct Authority and HM Treasury. "We want a complaints resolution process that reflects modern consumer expectations and offers businesses a stable regulatory environment in which to operate," he said.
Nonetheless, critics argue that the reforms risk undermining consumer access to justice. Simon Evans, chief executive of the Consumer Redress Association, warned: “This fee has the potential to deter valid complaints, particularly from consumers who may not have the resources to pursue redress independently.”
Motor finance complaints in retreat
The fall in overall complaints has been accompanied by a sharp decline in disputes relating to motor finance commissions—a category that had dominated complaint volumes in recent quarters.
The FOS received 21,500 complaints in this category in the latest quarter, a notable reduction from 36,000 in the final three months of 2024/25. While still significant, the decline suggests a cooling-off following the surge triggered by public concern over historic motor finance mis-selling.
Some of the heat was taken out of the issue by a Supreme Court ruling last week, which limited the scope for claimants to recover compensation, and by the Financial Conduct Authority’s (FCA) recent announcement of an industry-wide redress scheme. The FCA has also extended response timeframes for lenders facing complaints, pushing the deadline for final decisions to December 4.
Other categories see declines
Complaints about fraud and scams also dropped, falling from 8,800 in Q1 2024/25 to 6,800 this year. Of these, half related to authorised push payment frauds—cases in which consumers are deceived into transferring money to fraudsters. Lending practices, long a flashpoint for consumer disputes, also saw fewer challenges, with irresponsible lending complaints falling by more than 50%.
Among core financial products, credit card complaints fell to 6,600 (from 18,200), current account grievances dropped to 7,800, and complaints regarding car and motorcycle insurance declined to 2,800.
The ombudsman acknowledged that a portion of cases processed in this quarter were submitted prior to the introduction of the new fee structure, suggesting further declines may follow in subsequent updates.
Implications for the mortgage sector
While the mortgage industry has not seen the same concentration of complaints as the motor finance sector, the regulatory direction of travel is clear. Firms should be prepared for a tighter redress environment, one that favours early resolution and well-evidenced dispute handling.
The FOS has also launched consultations on how to streamline complaint triage and clarify when systemic issues require industry-wide attention. Both consultations remain open until October 8.
Mortgage lenders and brokers are advised to closely monitor the changing regulatory expectations, not least because well-handled complaints at firm level could increasingly prevent escalations to the ombudsman.
