By Steve Conley, Academy of Life Planning
When people complain to the Financial Ombudsman Service (FOS), they expect justice. What they often get is delay, denial, and deflection. For years, the FOS has been wrongly portrayed as the final word on consumer financial complaints, when in truth, its authority is both limited and misrepresented. Drawing from regulatory documentation, case law, and the advocacy work of individuals, we explore the core myths that perpetuate systemic failure.
🔍 Myth 1: The FOS is an Arbitration Service
Reality: The FOS is an adjudication scheme, not an arbitration body. Unlike arbitration, where both parties agree on procedures and arbitrators, the FOS enforces a rigid, one-sided process defined by the FCA’s DISP rules. This undermines parity and restricts consumer agency.
“This myth was dismantled in Berkeley Burke SIPP Administration LLP v Charlton [2017], affirming that the FOS is not an arbitration service but a regulated adjudicator under statutory rules.”
📅 Myth 2: The FOS’s ‘Final Decision’ Ends Its Responsibilities
Reality: There is no provision in law stating that a Final Decision terminates the FOS’s legal duties. Section 230A of FSMA defines the ‘Report of Determination’ — but it does not absolve the FOS of responsibility. Instead, it marks the point at which the FOS is remunerated.
Should we fail to challenge this misconception, we effectively grant the FOS a licence to abdicate oversight. Meanwhile, Section 233 FSMA does not grant them carte blanche to avoid compliance with the Data Protection Act (DPA), particularly when data misuse can materially harm complainants.
📊 Myth 3: FOS Data Reflects Public Confidence
Reality: The FOS does not disclose how many Final Decisions are rejected by consumers. This omission distorts performance data and conceals deep dissatisfaction. The appearance of resolution often masks systemic disempowerment.
Proposal: We need to establish an independent database of rejected outcomes to ensure transparent accountability.
⛓ Myth 4: The FOS Treats Allegations of Fraud Seriously
Reality: Prior to 2018, and in many cases since, the FOS routinely dismissed allegations of fraud, instead directing complainants to Action Fraud — even when police and regulatory referrals had already been made. Well-documented cases were minimised as customer service issues.
When consumers invoked their DPA rights under Sections 46 and 47 to request rectification or erasure of misinformation, the FOS’s legal team claimed that rejection of the Final Decision nullified those rights — a legally indefensible position.
“The anonymisation principle does not exempt the FOS from responsibility, especially when the firm being complained about knows exactly who the complainant is.”
🔒 Myth 5: FOS Oversight Is Robust and Impartial
Reality: The FOS’s use of first-party auditors like PwC introduces serious conflicts of interest. Though the National Audit Office (NAO) recommended structural reforms in 2012 — including scrapping the adjudicator role — these were poorly implemented in 2015 and followed by a surge in consumer complaints.
Alternative: We need to introduce second-party audits — where consumers assess regulators directly. Common in engineering, this model is largely absent from financial services and long overdue.
🛡️ Myth 6: The FOS Complies with Data Protection Law
Reality: The FOS invokes Section 233 FSMA to claim exemption from DPA rules unless the complainant is named. However, this interpretation fails under scrutiny. Firms use FOS decisions to justify actions that may harm complainants — often indefinitely and without proper redress.
Clarification: Section 233 provides conditional, not absolute, exemption. Misusing anonymisation to escape scrutiny is not only unethical, but potentially unlawful.
✨ A Blueprint for Reform
To restore balance and integrity, the following steps are essential:
- Public Myth Repository: A plain-text resource linking legislative references.
- Product-Based Checklists: So consumers can self-audit how their case was handled.
- Interactive Audit Tools: To assess compliance with DISP, FSMA, and DPA.
- Second-Party Auditing Platform: Enabling the public to score institutional accountability.
- Registry of Rejected Decisions: Illuminating the hidden scale of dissent.
This is what is neeeded. These tools won’t just expose a broken model. They will help build the replacement.
Steve Conley is founder of the Academy of Life Planning, and a campaigner for financial justice and consumer empowerment. To support second-party audit initiatives or collaborate on redress reform, contact steve.conley@aolp.co.uk.
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Academy of Life Planning 
This is a powerful and necessary exposé, Steve. Thank you for laying bare these entrenched myths.
One area I feel needs deeper emphasis, drawing from our experience and recent case law, is the increasing judicial scrutiny over the FOS’s jurisdictional reach — particularly in complex cases involving pensions, insurance, and vulnerable third parties.
For example, the Aviva v FOS [2017] case highlighted the court’s insistence that FOS decisions must be not only fair but rational and well-reasoned — especially where vulnerable individuals are indirectly affected. Yet, we continue to see the FOS deliver rulings with threadbare reasoning, all while hiding behind the cloak of discretion.
Equally troubling is the murky terrain of fractional ownership and pension-related investments, where the FOS’s selective legal victories are proudly broadcast — except, curiously, when they lose or settle out of court. We note a case was handled by a barrister from the same chambers who boast their successes online, yet his case remains absent — a silence that speaks volumes.
Also unaddressed in many reform proposals is the lack of recourse when the FOS overreaches its jurisdiction or misapplies regulatory rules like COBS, as demonstrated in Options UK v FOS [2024]. These are not just abstract legal points — they ruin lives, dismantle retirements, and silence the voiceless.
What our research shows — and what campaigners must now act on — is that this isn’t just a service in decline. It’s a structural failure compounded by regulatory theatre. The more we shine light on these judicial reviews, the more evident it becomes that the current model is beyond repair.
Let’s keep building momentum, case by case, voice by voice. Reform must not come from within — it must be demanded from without.
#FOSMyths #FinancialJustice #ReformNow #PensionsScandal #ConsumerVoice