A recent analysis of Financial Ombudsman Service (FOS) decisions related to credit card complaints reveals a more nuanced picture of dispute resolution than commonly perceived, challenging the long-held belief that the FOS consistently favors consumers over financial firms.
The review, conducted by a team with experience in financial services consulting, in-house complaints handling, and regulatory affairs, examined a sample of upheld and rejected credit card complaints. It sought to understand the weighting given to evidence from both customers and providers, the assumptions made when evidence was limited, and the potential impact of FOS decisions on firm policies and complaint handling. The findings, released Monday, suggest the FOS does not automatically prioritize customer allegations.
Historically, firms have operated under the assumption that the onus was on them to definitively prove they had acted correctly in every instance, with the FOS leaning towards upholding customer complaints in cases of doubt. However, the analysis indicates a shift in approach. According to the report, the Ombudsman now focuses on establishing whether lending was “actually or very likely to be irresponsible,” rather than simply finding fault with a lack of evidence demonstrating responsible lending.
The complaints reviewed generally centered on allegations of irresponsible lending and insufficient affordability checks. Customers frequently cited financial vulnerability or mental health issues stemming from debt as contributing factors. However, the FOS decisions consistently evaluated the evidence based on whether the lending was irresponsible at the time it was issued, not on subsequent financial hardship or unsubstantiated claims of vulnerability.
In several cases, providers were unable to furnish complete documentation of affordability checks conducted at the time of lending. Despite this, the Ombudsman often ruled in favor of the firms, finding no evidence to suggest the lending was unaffordable. One case, DRN 4197126, involved a Barclaycard customer who claimed automatic credit limit increases led to financial difficulties. The Ombudsman, acknowledging the lack of documentation from both parties due to the passage of time, found in favor of Barclaycard, stating, “I don’t have sufficient evidence to present that if it had [carried out sufficient checks], it would have realised that this increase was unsustainable.” The decision highlighted the importance of demonstrable unaffordability, rather than simply a lack of documented checks.
The analysis also revealed that the FOS does not automatically dismiss decisions to provide credit or set initial credit limits. Disputes typically arise from subsequent credit limit increases. The Ombudsman’s focus is on whether the information available at the time of the increase would have indicated the lending was unaffordable. Changes in a customer’s financial circumstances *after* the lending decision, if not reasonably foreseeable, do not automatically invalidate the original assessment.
The report recommends firms proactively gather and maintain detailed records of affordability assessments, including supporting documentation like bank statements and credit card statements, to facilitate reconstruction of the customer’s financial situation at the time of lending. Complaint handlers should focus on interpreting information to demonstrate the *probability* of affordability, considering factors like consistent payment history, responsible account management, and a lack of reliance on overdrafts.
Interestingly, the FOS acknowledged in one decision (DRN 3593868) that simply conducting proportionate checks does not guarantee a fair lending decision. This suggests a necessitate for firms to continually refine their automated lending processes and complaint handling policies. While fully automated systems are necessary, the report emphasizes the importance of incorporating broader affordability and sustainability considerations into the complaint resolution process.
The analysis also found that the FOS does not penalize providers for being unable to provide physical evidence for older complaints, instead reconstructing likely circumstances based on available information. The Ombudsman generally confines its investigation to the specific allegations raised in the complaint, avoiding broader “holistic” reviews.
The FOS, in a statement released February 11, 2026, outlined its complaint handling process, emphasizing that it first verifies whether the firm has had an opportunity to resolve the issue before becoming involved. The service then investigates, seeking input from both parties, and issues an initial assessment. Either party can request a final decision from an ombudsman if they disagree with the initial assessment. (Financial Ombudsman Service, “What to expect,” February 11, 2026)
The report concludes that firms should challenge “rogue” FOS decisions through legal review to prevent the establishment of unfavorable precedents, and quantify any perceived bias in uphold rates with concrete data. The findings suggest a more objective approach to credit card complaint resolution than previously assumed, but also highlight the ongoing need for firms to maintain robust documentation and proactively address potential affordability concerns.
