A High Court judge in London has ruled against the Financial Ombudsman Service in a dispute over whether consumers can pursue complaints about older overdraft and credit card cases outside the usual time limits, reported the Financial Times.
The case was brought by Barclays, NatWest, Santander and subprime lender Vanquis.
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They challenged the ombudsman’s position that some historic lending complaints could still be considered even after the standard deadline had passed.
The court found that the FOS had made a “fundamental error of law” in taking on such complaints beyond the established six-year period.
Under rules set by the Financial Conduct Authority, a consumer normally has six years to complain about a specific event.
If that period has passed, a complaint may still be made within three years of the point at which the consumer first became aware of the issue.
The FOS had argued that legal decisions, including a Supreme Court ruling in 2023, meant lenders carried an ongoing “corrective responsibility”.
On that basis, the ombudsman said a bank’s failure to put right an earlier problem for example, by declining to repay past interest charges could count as a new “omission” that could itself be challenged.
That reading would in practice have extended the period during which old lending cases could be examined.
Justice Dexter Dias rejected that approach. In the judgment, he said the FOS interpretation “seriously and unjustifiably” weakened the purpose of having a time limit and the need for “swift and informal dispute resolution”.
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 decision is expected to reduce the scope for consumers to bring complaints to the FOS over “unfair lending” under the Consumer Credit Act 1974.
During the case, banks argued that the FOS approach could have broad effects on older loans.
Santander gave evidence that complaint volumes against the bank had increased under the wider interpretation of the time limit.
NatWest said it welcomed the ruling and added that it had “a long history of working productively” with the FOS.
Barclays noted it was pleased with the decision.
