Changes to the way the Financial Ombudsman Service handles complaints are set to take effect from October 2026 [1] as part of wider reforms designed to make the UK financial redress system more predictable and consistent.

The reforms follow a joint consultation by the Financial Conduct Authority and the Financial Ombudsman Service on modernising the redress system [2].

The Financial Ombudsman has now published its policy statement confirming changes to its complaint handling rules. These include expanded grounds for dismissing certain complaints without considering their merits and greater clarity about the standards that should be applied when assessing past conduct.

The changes apply across financial services. They are not specific to car finance claims and do not alter the eligibility rules of the FCA's Motor Finance Compensation Scheme.

However, they could still be relevant to motorists whose financial complaints are considered by the Ombudsman.

Why Is the Financial Redress System Changing?

The FCA and Financial Ombudsman consulted on reforms earlier in 2026 following concerns about the predictability and consistency of the existing redress system.

One objective is to provide greater certainty about how the Ombudsman reaches decisions.

The FCA has said the reforms are intended to strengthen the framework for resolving disputes, encourage firms to identify and address problems earlier and improve consistency between regulatory requirements and Ombudsman decisions.

The changes also seek to make it clearer when complaints can be dismissed without progressing through a full investigation.

What Is Changing From October 2026?

Several changes to the Financial Ombudsman's rules are expected to take effect from 1 October 2026.

One of the most important concerns the circumstances in which the Ombudsman can dismiss a complaint without considering its merits.

The reforms expand and clarify those grounds. This is intended to allow complaints that are clearly unsuitable for further consideration to be identified earlier in the process.

The Ombudsman will also have clearer rules for assessing what was expected of a financial business when the event being complained about occurred.

This means decisions should take account of relevant law, FCA rules, regulatory guidance and other applicable standards that were in place at the time of the relevant conduct.

That principle could be particularly important for complaints concerning financial products or practices dating back many years.

Why Does the Timing of Regulatory Standards Matter?

Financial regulation changes over time.

A practice permitted under one regulatory framework may later become restricted or prohibited. That does not necessarily mean the later standard should automatically be applied retrospectively when assessing earlier conduct.

The reforms seek to provide greater clarity on this point.

When deciding what is fair and reasonable, the Ombudsman will continue to consider relevant circumstances. However, the rules will make clearer the importance of the legal and regulatory framework that applied when the event took place.

The Finance & Leasing Association has welcomed this aspect of the reforms [3].

The industry body said complaints should be assessed against the rules and standards applicable at the relevant time. It believes this should improve consistency and reduce uncertainty surrounding retrospective interpretations.

What Does This Mean for Car Finance Complaints?

The reforms are relevant to financial complaints generally, so they may also affect certain complaints involving motor finance.

However, they should not be confused with changes to the FCA's Motor Finance Compensation Scheme [4].

A consumer considering a car finance claim will still need to establish which process applies to their circumstances.

The FCA compensation scheme has its own rules for determining which historic motor finance agreements fall within scope and how eligible consumers should receive car finance compensation.

The Financial Ombudsman reforms do not rewrite those eligibility requirements.

They instead concern how the Ombudsman deals with complaints that come within its jurisdiction.

Does This Change PCP Claims?

Not directly.

A PCP claim concerning historic motor finance arrangements may potentially fall within the FCA compensation scheme where the relevant eligibility requirements are satisfied.

The new Ombudsman rules do not automatically make a PCP claim eligible or ineligible.

Likewise, motorists considering PCP claims should not assume that the October reforms change whether their original finance agreement was affected by the practices being examined through the wider car finance scandal.

The reforms concern complaint handling and decision making at the Financial Ombudsman rather than the underlying criteria for PCP finance claims under the FCA scheme.

What About Historic Car Finance Conduct?

This is where the reforms require some careful distinction.

Many complaints connected to car finance mis-selling concern agreements entered into years before the current regulatory scrutiny of the motor finance market.

Discretionary commission arrangements, for example, were prohibited by the FCA in 2021 [5]. Some of the agreements currently being examined date considerably further back.

The Ombudsman reforms emphasise consideration of the legal and regulatory standards applicable at the relevant time.

That does not mean historic complaints about mis-sold car finance will automatically fail.

It means the applicable standards at the time of the conduct form an important part of the assessment.

For motorists, the outcome of any complaint will continue to depend on the relevant facts, applicable rules and the process under which the complaint is being considered.

A New Registration Process Is Also Planned

The reforms go beyond the changes taking effect in October.

The Financial Ombudsman is also developing a new registration stage for complaints.

This process is intended to establish whether a complaint falls within the Ombudsman's jurisdiction and whether it is ready to proceed before it is allocated for substantive investigation.

The wider rollout is expected during 2027.

The aim is to identify jurisdictional or procedural problems earlier rather than after significant work has already been undertaken on a case.

For consumers, this could potentially mean greater clarity at an earlier stage about whether the Ombudsman can consider their complaint.

What Has the Motor Finance Industry Said?

The Finance & Leasing Association has broadly welcomed the reforms.

FLA Chief Executive Shanika Amarasekara said the changes represent an important move towards greater consistency and predictability within the redress system.

The organisation particularly welcomed greater clarity about assessing complaints against the rules and standards that existed at the relevant time.

For lenders, increased predictability could make it easier to understand potential liabilities and handle complaints consistently.

For consumers, the effectiveness of the reforms will ultimately depend on whether greater efficiency can be achieved while maintaining access to fair and independent dispute resolution.

Does This Affect the FCA Motor Finance Compensation Scheme?

The key point for motorists is that these are separate developments.

The Financial Ombudsman reforms concern the wider financial complaints system.

The FCA's Motor Finance Compensation Scheme deals specifically with redress relating to certain historic motor finance arrangements.

The Ombudsman changes do not alter the scheme's eligibility criteria, compensation methodology or current legal position.

Consumers with potential car finance claims should therefore avoid assuming that the October changes either strengthen or weaken their individual entitlement to compensation or car finance refund.

The position of each complaint will depend on the process under which it is being considered.

What Should Consumers Know?

Consumers continue to have the right to complain directly to their financial provider without paying a third party.

Where a complaint cannot be resolved with the business, the Financial Ombudsman Service may be able to consider it if the relevant requirements are satisfied.

Consumers considering PCP car finance or PCP refund complaints or other historic motor finance issues should also establish whether their circumstances fall within the FCA's separate compensation scheme.

The distinction matters because a complaint handled through the Financial Ombudsman and a claim considered under an industry wide redress scheme are not necessarily subject to the same process.

What Happens Next?

The confirmed changes to the Financial Ombudsman's complaint handling rules are due to begin on 1 October 2026, while further reforms, including the new registration process, are expected to develop into 2027.

The FCA and Financial Ombudsman hope the changes will create a redress system that provides clearer expectations for businesses and consumers.

For motorists following developments in FCA car finance redress, the reforms add another change to the wider financial complaints landscape.

They do not, however, change the fundamental question at the centre of individual car finance claims. Whether a consumer is entitled to redress will continue to depend on the circumstances of their agreement and the rules governing the relevant compensation or complaints process.

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References:

1. Changes to the way the Financial Ombudsman Service handles complaints are set to take effect from October 2026 - https://www.financial-ombudsman.org.uk/who-we-are/data-insight/news/financial-ombudsman-outlines-next-phase-service-reforms
2. joint consultation by the Financial Conduct Authority and the Financial Ombudsman Service on modernising the redress system - https://www.fca.org.uk/publications/consultation-papers/cp26-9-modernising-redress-system
3. The Finance & Leasing Association has welcomed this aspect of the reforms - https://fla.org.uk/news/fla-welcomes-measures-to-improve-consistency-in-financial-complaints/
4. FCA's Motor Finance Compensation Scheme - https://www.fca.org.uk/publication/policy/ps26-3.pdf
5. Discretionary commission arrangements, for example, were prohibited by the FCA in 2021 - https://www.fca.org.uk/news/press-releases/fca-ban-motor-finance-discretionary-commission-models