Financial Services and Markets Bill [HL]

Debate between Lord Sharkey and Lord Stockwood

Committee stage
Wednesday 8th July 2026 Grand Committee

[Lord Stockwood (Lab)]

My Lords, I am grateful to the noble Baroness for tabling this amendment and giving the Committee a further opportunity to discuss the FOS.

An effective ombudsman service ensures that consumers have quick and easy redress when things go wrong, improving customer confidence in, and engagement with, our financial services system. The FOS largely fulfils that vital role, and the reforms in the Bill will improve that further, ensuring that it provides a quick and informal route for resolving disputes in financial services.

The amendment would undermine this vital role entirely. We believe that replacing the FOS with a financial adjudication service alongside the new tribunal appeal structure would create a more formal, legalistic and adversarial system. That approach would move away from Parliament’s intention of providing consumers and firms with an accessible alternative to resolving disputes through the tribunal and courts system. The Government’s view is that this would not be the right outcome for consumers and firms. The Government’s reforms have been developed in response to issues identified through the review and consultation last year to stop the FOS acting like a quasi-regulator, to stop it taking the lead on mass redress events and to deliver a clearer, more consistent and predictable framework.

I thank the noble Lord for raising that issue and I apologise for not writing in answer to his question. I promise that I will get back to him as soon as we have that information to hand again.

[Lord Sharkey (LD)]

Perhaps the Minister could answer it now.

[Lord Stockwood]

I do not have it to hand. My apologies, I will bring it to the noble Lord. We are confident that the changes will improve trust and confidence that the FOS acts fairly and impartially, while ensuring that decisions are closely aligned with the high standards of conduct and consumer protection set by the FCA where relevant.

The right approach is this careful, targeted reform that preserves the core strengths and benefits of the FOS model—quick, informal and accessible dispute resolution—while delivering the necessary changes to improve the overall operation of the framework. I therefore ask the noble Baroness to withdraw her amendment.

Financial Services and Markets Bill [HL]

Debate between Lord Sharkey and Lord Stockwood

Committee stage
Monday 22nd June 2026 Grand Committee

[Lord Sharkey (LD)]

Would the Minister mind repeating that?

[Lord Stockwood (Lab)]

Certainly. We are trying to align the FOS’s “fair and reasonable” test with the FCA rules, but it retains some discretion.

I apologise for taking another moment to consult my officials. For clarity, where the FOS has aligned with the FCA rules, it has to believe that that is the case, and that determination has to be upheld.

--- Later in debate ---

[Lord Sharkey (LD)]

Looking at the legislation itself, it seems clear that if the act or omission is in breach of the FCA’s rules or the consumer duty that absolutely qualifies it as being okay. There is no subordinate reference to “fair and reasonable”.

[Lord Stockwood (Lab)]

I will take the opportunity to write because this definitely needs clarification. The note that I have says that in cases where the omission being complained about is governed by FCA rules, if the firm has met its obligations under those rules, the FOS will be required to find that it acted fairly and reasonably. All the FCA’s handbook is relevant here, including the principles for businesses and, therefore, the consumer duty. There will be coherence between those determinations but only when the FOS believes that the fair test has not been met can it challenge the FCA. I will write to noble Lords because this is an important point that needs a definitive answer. I apologise for that.

On Amendments 37, 42 and 43, as I have set out, the reforms to the FOS’s fair and reasonable test are designed to preserve the FOS’s existing discretion in areas not covered by FCA rules. The Bill specifies the matters that the FOS must take into account when making determinations, taking this out of FCA rules and making it subject to parliamentary oversight. The matters listed include the law, relevant guidance, codes of practice and further materials published by the FCA or other regulators. This provides greater clarity around how the FOS makes its decisions. As I explained earlier, the Government’s view is that where there are relevant FCA rules, there are benefits from ensuring that FOS decisions are consistent with them. I will write to clarify further in case I have created confusion in this conversation.

On Amendments 38 and 41, the Government recognise the important role the FOS plays within the wider financial services regulatory environment. The reforms included in the Bill are about making sure that the FOS and the FCA are able to carry out their respective roles effectively, co-operating where necessary but maintaining their separate responsibilities. These amendments would go further and require the FCA to become involved in the determination of individual complaints. This is a role that the FCA is not designed or equipped to undertake. It is, and should continue to be, the role of the FOS as the independent, impartial dispute resolution service.

Turning to Amendments 39 and 40, the Government’s review of the FOS concluded that the “fair and reasonable” test works well in the majority of cases to enable a quick and fair resolution of complaints. Removing the “fair and reasonable test”, as proposed by these amendments would undermine the FOS’s quick and informal role and put in its place a more legalistic approach based on strict adherence to the FCA’s rules. This could introduce additional costs and delays, and reduce the FOS’s effectiveness as an accessible and simple alternative to the courts.

I turn to Clause 7 and the new referral mechanism, which will require the FOS to seek a view from the FCA where it considers that a matter relating to a complaint may indicate ambiguity in the FCA’s rules or have wider implications for consumers and firms. As well as enabling the FOS to make decisions that are consistent with FCA rules, the referral process will ensure that systemic questions and issues are identified at an early stage and the FCA can consider whether a regulatory or supervisory intervention may be appropriate, rather than continuing to consider each individual complaint separately. Alongside the new reporting requirements provided for in Clause 9, this will improve understanding of the FCA’s rules and the standards expected of firms, in turn improving confidence in financial services and ultimately reducing the number of consumers who experience poor treatment, which all noble Lords will agree is preferable to providing redress after the fact.

Given the important role that the FOS plays, this is a clearly a matter of huge interest, and there is a range of views on exactly what the best system would look like. Notwithstanding that, I will write on the specific things that I might have caused confusion about.

I have listened carefully to the representations. The Government’s view is that the reforms set out in the Bill strike an appropriate balance, improving the clarity and consistency of redress arrangements while allowing the FOS to continue to make fact-specific decisions on individual complaints. They ensure that both the FOS and the FCA are equipped to fulfil their respective roles and responsibilities so that consumers can have confidence in the key financial services on which they rely, and so that firms understand what is expected of them and can act on it. I therefore ask the noble Lord to withdraw the amendment.