Banks to pay ombudsman more as Treasury crackdown costs £8m
Banks will pay more to the Financial Ombudsman Service in the next year as the body strums up cash for its bill to meet the Treasury’s clampdown.
Financial services will pay the FOS £86m in the 2026/27 financial year – an increase of £16m – under new proposals, which aim to beef up the Compulsory Jurisdiction (CJ) levy.
The levy is a mandatory annual charge paid by the financial services industry to the Financial Conduct Authority (FCA) to fund a portion of the Financial Ombudsman Service’s (FOS) costs.
The increase comes in part from inflation but also the expected £8m cost of the FOS’ ‘Modernising Redress’ programme, as part of the Treasury’s promised crackdown on the service.
In her Leeds Reforms package, Chancellor Rachel Reeves confirmed a crackdown on the FOS with plans for it to “be returned to its original purpose as a simple, impartial dispute resolution service”.
Former City minister Emma Reynolds had addressed concerns the body had become a “quasi regulator” after complaints to the watchdog neared-PPI heights following a surge in motor finance grievances.
A rise in professional representatives increased the FOS‘ caseload by over 50 per cent in year ending 31 March 2025.
For the year ahead, the FOS said it expects to receive 188,000 cases in 2026/27 across a range of financial products including bank accounts, credit cards and insurance.
Ombudsman’s motor finance clear out
The body also expects to resolve 60,000 motor finance cases in the next year – a major jump from 15,000 in the current period. This plan comes under the assumption the FCA will have kicked off its motor finance redress scheme by early 2026.
The FOS anticipates only receiving 5,000 new car finance-related complaints in 2026/27, which are expected to cover how firms implement the scheme.
Case fees will also jump for the first time in three years, as part of the new proposals which are under consultation til January 2026.
The standard fee will rise 4.6 per cent to £680, whilst the professional representatives charge will rise to £260, from £250, which the FOS says will bring the rates in line with inflation.
As part of the regulatory clampdown on buy now, pay later, the FOS has also anticipated an additional 2,000 cases in the area starting the in the second half of 2026.
Jenny Simmonds, interim chief executive at the Financial Ombudsman Service, said the next year would be “crucial” for the service and pledged to lay the foundations for an “agile, responsive and modern” FOS.
The FOS has been rocked by a leadership crisis in the last year following the abrupt departure of chief executive Abby Thomas in February.
A Treasury Committee report, published in July, revealed Thomas had been dismissed after a “mutual collapse in confidence” stemming from “fundamental disagreements” with the board over strategy.
Just days later, Baroness Zahida Manzoor, chair of the FOS, announced she would step down at the end of her term on August 1.