A win for the banks24 Jun 2026 15:41
UK banks have fought off a move by the Financial Ombudsman Service to allow consumers to bring complaints about the terms of historic loans, a shift the industry warned was opening the floodgates to compensation demands.
The High Court in London ruled on Wednesday that the financial services watchdog made a “fundamental error of law” by taking on complaints that consumers made about overdrafts and credit cards outside the established six-year timeframe.
Barclays, NatWest, Santander and subprime lender Vanquis brought the legal challenge against the FOS.
The judgment is a further blow for the FOS, which is already being overhauled by the government to curb its powers in response to criticism that it acts like a “quasi-regulator” and deters investment in the UK.
Under rules laid down by the Financial Conduct Authority, consumers have six years to complain to the ombudsman about a particular incident, or, if that window is missed, three years from the date they first became aware of the incident.
But the FOS argued that court rulings, including a judgment by the Supreme Court in 2023, meant that lenders had an ongoing “corrective responsibility”.
The ombudsman claimed that if a bank failed to address or correct a problem, such as refusing to refund past interest charges, this amounted to a fresh “omission” that consumers could complain about.
Its interpretation in effect kept the clock ticking, allowing the FOS to investigate old lending decisions years later.
However, in a judgment on Wednesday, Mr Justice Dexter Dias ruled that this was wrong in law.
The judge said the FOS’s approach “seriously and unjustifiably” undermined the rationale for a time limit and the need for “swift and informal dispute resolution”.
In an unusual twist, the FCA intervened in the case to oppose the FOS move. The authority told the court it was concerned the ombudsman was misinterpreting the law to grant itself new powers. The FCA did not respond to a request for comment.
The FOS said: “We are disappointed with today’s judgment. We are carefully considering what it means for the cases affected, as well as the wider implications.”
The judgment is expected to curb the ability of consumers to complain to the FOS about “unfair lending” under the Consumer Credit Act 1974. Complaints about credit cards were the third-biggest source of cases at the FOS last year, with almost 23,000 claims made in this area.
Banks had told the court the FOS’s approach had sweeping co
Sign In
Follow the stocks
