A 10-year long stop on claims made to the Financial Ombudsman Service (FOS) may exclude most protection products as part of an exemption proposed by HM Treasury (HMT).
The consultation proposing the absolute 10-year time limit includes scope for exemptions for longer-term products “such as pensions, mortgages and long-term investments”.
With many protection products running for far longer than ten years and often implemented to cover mortgage debts, it would appear likely these would also be excluded.
Health & Protection understands that any proposals in this area will depend on the outcome of the Treasury consultation with any exceptions then being consulted on by Financial Conduct Authority (FCA) separately.
HM Treasury and the FCA have been contacted for comment.
In the consultation, HM Treasury proposed the absolute time limit for consumers to bring complaints to the FOS.
“Consistent with the aim of providing a simple, impartial dispute resolution service which deals quickly and effectively with complaints, an absolute time limit in legislation will require complaints to be brought within 10 years of the conduct complained of,” Treasury said.
“This will avoid the risk of the FOS having to deal with a high number of historic cases, which can be challenging to resolve quickly and effectively.”
However, it added there was a need for flexibility in this time period and the products covered.
“Any limits must be balanced with protecting consumers’ ability to access simple and quick redress through the FOS, particularly in relation to longer-term products, such as pensions, mortgages and long-term investments, where knowledge of the cause to complain may not emerge until a significant amount of time after the event,” it continued.
“The government considers that setting out an absolute time limit in legislation would provide greater certainty for all parties around the maximum time within which a complaint can be brought to the FOS.
“However, it also recognises that there may need to be limited flexibility to depart from this in exceptional circumstances where longer timeframes are justified, for example, longer-term products such as pensions, mortgages and long-term investments.”
At present the FOS cannot consider a complaint that is referred to more than six years after the event complained of or, if later, three years from the date on which the complainant became aware or ought reasonably to have become aware that they had cause for complaint.
Limited exceptions are allowed such as where the failure to comply with the time limit was as a result of exceptional circumstances.
Lower redress interest rate
A reduced interest rate applied to redress payments made to consumers will also be introduced by the FOS as part of the changes.
The changes were hailed by chancellor Rachel Reeves when giving her Mansion House speech last night.
“As I promised last year, I am delivering the most significant reform to the Financial Ombudsman Service since its inception, including proposing to a limit for ten years for claims,” Reeves said.
“This will speed up the time it takes for consumers to get redress for their complaints, returning it to its original purpose as a simple, impartial arbitration service and ensuring that it no longer acts as a quasi-regulator.”
“And I welcome the announcement today, made by the Financial Ombudsman Service that will reduce the interest rate it applies before a decision from 8% to base rate plus 1%.”
The FOS can also direct a business to pay 8% interest if it does not pay compensation on time, which will remain in place following feedback from the consultation about the need to ensure firms do not delay payment.
The ombudsman is aiming to introduce this change from 1 January 2026 for new complaints referred to it from that date, but will confirm plans for implementation in due course.
Further details will be published in the autumn, alongside wider proposals to modernise the redress system.
