The FSCS and the FOS are the redress topics in CeMAP® FRE2, the second unit of CeMAP 1 (FSRE) set by Walbrook (LIBF). FRE2 AC7.2 lists "Complaint handling procedures", "The Financial Ombudsman Service (FOS)" and "The Financial Services Compensation Scheme (FSCS)" alongside treating customers fairly and conduct risk. Both schemes are UK-wide, so the rules below apply in England, Wales, Scotland and Northern Ireland. For where FRE2 sits in the module, see the CeMAP 1 (FSRE) hub; for the whole unit, the FRE2 unit guide. The figures are as of October 2026.
| FOS | FSCS | |
|---|---|---|
| Full name | Financial Ombudsman Service | Financial Services Compensation Scheme |
| When it helps | The firm is trading but the complaint is unresolved | The firm has failed and cannot pay claims |
| Legal basis | FSMA 2000 Part XVI; FCA rules in DISP | FSMA 2000 Part XV; FCA rules in COMP and PRA rules |
| Cost to the consumer | Free | Free |
| Money limit | £455,000 for acts on or after 1 Apr 2019 (complaints referred in 2026/27) | £120,000 deposits; £85,000 investments and home finance |
What are the FOS and the FSCS, and how do they differ?
The FOS and the FSCS are both free UK schemes set up under FSMA 2000 from 1 December 2001. The Financial Ombudsman Service resolves complaints against firms that are still trading. The FSCS pays compensation only when an authorised firm has failed.
The simplest way to separate them is to ask whether the firm can still pay. If a solvent lender mishandles arrears, the customer complains to the lender and then, if needed, to the ombudsman. If a broker that gave unsuitable advice has gone into administration, the customer claims from the FSCS instead.
Both are independent of the FCA, although the FCA writes the rules that firms must follow for each: DISP for complaints and the ombudsman, COMP for compensation. The FCA and PRA guide explains where these sourcebooks sit in the Handbook's Redress block.
Key fact: The FOS deals with firms that are trading; the FSCS deals with firms that have failed. A question that says "the firm has ceased trading and has no assets" points to the FSCS.
How must a firm handle a complaint?
A firm must handle complaints under DISP 1: acknowledge each one promptly, investigate it fairly, and send a final response within 8 weeks of receipt. The final response must explain the customer's right to refer to the Financial Ombudsman within 6 months.
DISP treats almost any expression of dissatisfaction as a complaint, whether oral or written and whether justified or not, if the customer says they have suffered, or may suffer, financial loss, material distress or material inconvenience.
The complaint-handling steps
- Receive and record. The firm must have written internal procedures and must let customers complain by any reasonable means.
- Acknowledge. Send a prompt written acknowledgement and keep the customer informed (DISP 1.6.1R).
- Investigate. Look into the complaint competently, diligently and impartially, by staff with the right authority.
- Assess and decide. Decide fairly, offer redress where it is due, and explain the decision in plain language.
- Respond in time. Within 8 weeks, send a final response, or a holding response that explains the delay and the customer's right to go to the ombudsman now (DISP 1.6.2R). Payment services complaints have shorter limits of 15 business days, or 35 in exceptional cases.
- Learn. Analyse root causes and report complaint data to the FCA.
A complaint resolved by close of business on the third business day after receipt can be closed with a summary resolution communication, a short written message that still tells the customer about the ombudsman (DISP 1.5). Firms must keep complaint records for 3 years from receipt (DISP 1.9.1R). The rules are in the FCA Handbook, DISP 1.6.
Exam tip: The 8-week clock starts when the firm receives the complaint. The 6-month clock starts from the date of the final response. Questions swap them.
When can a complaint go to the Financial Ombudsman?
A complaint can go to the Financial Ombudsman once the firm has sent its final response, or once 8 weeks have passed without one (DISP 2.8.1R). The customer must refer it within 6 months of the final response, and within the 6-year or 3-year long-stop.
The time limits
| Limit | Rule |
|---|---|
| Firm's deadline | 8 weeks from receiving the complaint |
| Customer's referral deadline | 6 months from the date of the final response |
| Long-stop | 6 years from the event complained of, or, if later, 3 years from when the customer knew or ought reasonably to have known they had cause to complain |
The ombudsman can look at a late complaint if the delay was caused by exceptional circumstances, or if the firm consents. The firm must say in its final response whether it consents to a complaint the firm thinks is out of time.
Who can complain
Eligible complainants include consumers, micro-enterprises, small businesses, charities and trustees below set size limits. A mortgage customer, a borrower in arrears and a guarantor can all be eligible. The Financial Ombudsman's time limits page sets out the consumer view.
Mortgage complaints
Mortgage complaints that reach the ombudsman often concern affordability, unsuitable advice, early repayment charges, rate changes and the handling of arrears. On arrears, the ombudsman tests the lender's conduct against MCOB 13, which our mortgage arrears guide explains.
Key fact: The customer does not have to wait for a final response if 8 weeks have passed. After 8 weeks without a final response, the ombudsman can take the complaint.
What can the Financial Ombudsman award?
The Financial Ombudsman can award up to £455,000 for acts on or after 1 April 2019, and £205,000 for earlier acts, on complaints referred from 1 April 2026 to 31 March 2027 (DISP 3.7.4R). It can also direct a firm to put things right.
These are the limits as of October 2026, from DISP 3.7. The limits rise each 1 April in line with CPI, so check them every year.
The ombudsman decides by what is fair and reasonable in all the circumstances, taking account of law, FCA rules, codes and good industry practice. An award can cover:
- financial loss, including consequential loss;
- distress and inconvenience, and damage to reputation;
- a direction to take steps, such as correcting a credit file or reworking a mortgage account.
Interest and costs are outside the money limit (DISP 3.7.5). If fair compensation is higher than the limit, the ombudsman can recommend that the firm pays the balance, but that part is not binding.
Worked example: which limit applies?
The limit depends on two dates: when the act happened and when the complaint was referred.
| Case | Advice given | Referred to the FOS | Limit |
|---|---|---|---|
| A | March 2018 | June 2026 | £205,000 (act before 1 Apr 2019) |
| B | May 2023 | June 2026 | £455,000 (act on or after 1 Apr 2019) |
| C | May 2023 | May 2025 | £445,000 (2025/26 limit) |
In case C the same advice gets a lower limit because it was referred a year earlier. If the customer accepts the decision, it binds the firm and the customer and is final, under section 228 of FSMA 2000. If the customer rejects it, they can still go to court.
Exam tip: An ombudsman decision binds the firm only once the customer accepts it. The customer is never forced to accept.
What does the FSCS protect, and up to how much?
The FSCS protects deposits up to £120,000 per eligible person per authorised institution for firms failing on or after 1 December 2025. Investments and home finance advice and arranging are protected up to £85,000 per person per firm, and most insurance at 90% or 100%.
| Product or service | FSCS limit (as of October 2026) |
|---|---|
| Deposits (banks, building societies, credit unions) | £120,000 per person per authorised institution |
| Joint deposit accounts | £120,000 per account holder, so £240,000 for two |
| Temporary high balances (for example house sale proceeds) | Up to £1.4m for 6 months from the deposit |
| Investments | £85,000 per person per firm |
| Home finance: mortgage advice and arranging | £85,000 per person per firm |
| Compulsory insurance, life and long-term insurance | 100%, no cap |
| Other insurance, such as buildings and contents | 90%, no cap |
Source: the FSCS "what we cover" pages. The deposit limit was £85,000 from 1 January 2017 to 30 November 2025. The investment and home finance limits stayed at £85,000.
Rules behind the limits
- Per authorised institution, not per brand. Two brands that share one banking licence share one £120,000 limit.
- Mortgage advice cover applies to advice given on or after 31 October 2004 about the customer's main home in the UK. Buy-to-let and commercial advice are excluded. Home purchase plans and home reversion plans have been covered since 6 April 2007.
- The firm must have failed, meaning it is unable, or likely to be unable, to pay claims.
- Funding. Authorised firms pay for the FSCS through levies.
Worked example: deposit cover
Priya holds £100,000 in Bank A and £50,000 in Bank B. Bank B is a brand of Bank A under the same banking licence. Bank A fails in March 2026.
- Her total with the authorised institution is £100,000 + £50,000 = £150,000.
- The FSCS covers £120,000 per person per authorised institution.
- Compensation is £120,000, and £30,000 is unprotected.
Had Bank B held its own licence, both balances would have been fully covered: £100,000 and £50,000, each within a separate £120,000 limit.
Key fact: The FSCS deposit limit is £120,000, but the limit for investments and mortgage advice is still £85,000. Only deposits rose on 1 December 2025.
What happens to a mortgage if the lender fails?
A mortgage is a debt, not a deposit, so if the lender fails the borrower still owes the full balance on the same terms. Another firm normally takes over the book. The FSCS protects savings up to £120,000 but never writes off mortgage debt.
The borrower keeps the protections in the mortgage contract. A fixed rate continues to the end of its term, and any variable rate follows whatever the contract allows. A regulated firm must administer the loan, so MCOB still applies, including the arrears rules.
Savings held at the same failed bank are a separate matter, protected as deposits for each account holder, and payments on the mortgage continue as before. Some borrowers whose loans passed to inactive lenders after 2008 could not move to a new deal; the FCA introduced a modified affordability assessment for these "mortgage prisoners" in MCOB 11.9.
Exam tip: "What happens if you have a mortgage and the bank goes bust?" The answer is always that the debt remains. Options that say the FSCS repays the mortgage are wrong.
How do CeMAP questions test FOS and FSCS?
CeMAP questions test FOS and FSCS mostly through numbers and boundaries: the 8-week and 6-month limits, the £120,000 and £85,000 limits, whether a decision is binding, and which scheme applies. FRE2 case studies may set these inside a complaint scenario.
In our reading of FRE2, the common question patterns are:
| Pattern | What the question checks |
|---|---|
| Which scheme? | Firm trading means the FOS; firm failed means the FSCS |
| Time limits | 8 weeks from receipt; 6 months from final response; 6 years or 3 years |
| Limits | £120,000 deposits; £85,000 investments and mortgage advice; FOS limits by act date |
| Per what? | Per person, per authorised institution, not per account or brand |
| Binding effect | Binding on the firm and customer only after acceptance |
| Scope | Mortgage debt is not protected; buy-to-let advice is outside FSCS home finance cover |
A typical FRE2 case study describes a couple who were badly advised, complained, and received a final response they dislike. The linked questions then ask when they must go to the ombudsman, what it can award, and what changes if the firm fails. Read the dates in the scenario carefully: they usually decide the answer.
AML and data protection sit in the same criterion, AC7.2, so FRE2 papers often place them next to complaints questions. Our anti-money laundering guide covers that half. For a single page of every 2026/27 figure, including these limits, see our CeMAP tax tables.
Exam tip: Walbrook does not say which year's figures each exam window uses. Use the tax table in your study materials if a figure differs from this page.
Your FRE2 complaints and compensation study plan
Your FRE2 complaints and compensation study plan takes about four study sessions: learn the two schemes and the DISP steps, memorise the 8-week, 6-month and 6-year limits, then drill the money limits until you score 85% or more three times in a row.
- Session 1. Take the free FRE2 diagnostic to see how AC7.2 compares with your other topics.
- Session 2. Write out the six complaint steps and the three time limits from memory. Check them against the tables above.
- Session 3. Work through both worked examples again with your own numbers: change the brands, the dates and the amounts.
- Session 4. Run the regulatory framework topic drill, which covers AML, data protection, complaints, the FOS, the FSCS and TCF.
For short sessions, use the free 20-question FRE2 quick practice. When the topic feels secure, sit the free FRE2 mock 1 under the real timing: 40 questions in 60 minutes, 28 to pass.
The sample questions below come from our FRE2 bank. Topic drills and mocks 2 to 10 are part of Pro, at £6.99 a week, £11.99 a month or £22.99 for three months, covering all five units. Our readiness rule matches the app: three mocks in a row at 85% or more, with every topic at 80% or more. It is a guide, not a pass guarantee.
10 free FRE2 practice questions with answers
Try each one, then open the answer. For a timed experience use the free mock exam.
1. If the NCA refuses consent during the notice period for a transaction, how long is the moratorium period during which the firm must not proceed, unless a court extends it?
- A. 7 working days
- B. 31 days
- C. 14 days
- D. 6 months
Show answer
B. 31 days
Section 335(6) of POCA sets a moratorium period of 31 days, starting with the day the person receives notice that consent is refused. A court can extend the moratorium under section 336A. After it ends, the firm is treated as having consent.
2. A client stepped down as a senior judge eight months ago. How should the firm treat him under the PEP rules in the MLR 2017?
- A. As a PEP only if he holds another public office
- B. As a PEP for at least 12 months after he left office
- C. As a PEP only until he receives his final salary
- D. As an ordinary customer from the day he left office
Show answer
B. As a PEP for at least 12 months after he left office
Regulation 35(9) requires the PEP measures to continue for at least 12 months after the person ceased to be entrusted with the prominent public function, or longer if the firm considers it necessary because of the risk. Eight months after leaving office, he is still treated as a PEP.
3. Under the Consumer Rights Act 2015, can a trader exclude liability for death or personal injury caused by its negligence?
- A. No, such a term or notice cannot bind the consumer
- B. Only for services provided free of charge
- C. Yes, if the term is clearly printed
- D. Yes, if the consumer signs separately
Show answer
A. No, such a term or notice cannot bind the consumer
Section 65(1) says a trader cannot, by a term of a consumer contract or a consumer notice, exclude or restrict liability for death or personal injury resulting from negligence.
4. After selling her home, Grace has £900,000 of sale proceeds in her bank account while she waits to buy her next property. What FSCS protection applies to this temporary high balance?
- A. Up to £120,000 only
- B. Up to £1 million for twelve months
- C. The full amount with no time limit
- D. Up to £1.4 million for six months
Show answer
D. Up to £1.4 million for six months
The FSCS protects qualifying temporary high balances, such as proceeds from selling a home, up to £1.4 million for six months from when the amount was first deposited. After that, the standard deposit limit applies.
5. Which senior manager conduct rule is breached if a senior manager hands responsibility for a function to an unqualified colleague and never checks on it?
- A. SC4, disclosing information to the regulators
- B. SC3, appropriate delegation and effective oversight
- C. Rule 3, openness and cooperation with regulators
- D. Rule 5, proper standards of market conduct
Show answer
B. SC3, appropriate delegation and effective oversight
Senior Manager Conduct Rule SC3 requires a senior manager to take reasonable steps to ensure that any delegation is to an appropriate person and that they oversee the delegated responsibility effectively.
6. Advice was given to Maria in October 2018. She realised it was unsuitable in January 2026 and complained to the firm in October 2026. Is her complaint within the Ombudsman's time limits?
- A. No, as more than six years have passed since the advice
- B. No, as complaints must be made within 12 months of awareness
- C. Yes, as it is within three years of when she became aware
- D. Yes, as there is no time limit for mortgage complaints
Show answer
C. Yes, as it is within three years of when she became aware
DISP 2.8.2R(2) bars complaints referred more than six years after the event or, if later, more than three years after the complainant became, or ought reasonably to have become, aware of the cause for complaint. Maria became aware in January 2026, so a complaint in October 2026 is within the three-year limit even though the six-year limit has passed.
7. An adviser's analysis finds a client is eligible for a lender's product only if she adds a £999 fee to the loan. What must the adviser consider before recommending this?
- A. Whether paying the fee up front would be better for her
- B. Whether the lender will reduce its valuation fee
- C. Whether the fee is lower than the adviser's commission
- D. Whether her employer will pay the fee
Show answer
A. Whether paying the fee up front would be better for her
MCOB 4.7A.6R lists whether the customer should pay fees up front rather than add them to the loan among the suitability factors. Adding a fee means paying interest on it over the term, so the adviser must consider whether she can and should pay it up front.
8. Two unmarried clients buying a home together ask their mortgage adviser to draft a declaration of trust setting out their shares. What should the adviser do?
- A. Ask the estate agent to prepare the declaration
- B. Refer them to a solicitor or conveyancer for legal advice
- C. Draft the declaration using a standard online template
- D. Tell them a declaration of trust is never needed
Show answer
B. Refer them to a solicitor or conveyancer for legal advice
Drafting legal documents and advising on how property is held are matters for a solicitor or conveyancer. The adviser should highlight why this matters and refer the clients for legal advice, rather than act beyond their expertise.
9. What is the FCA's stated aim for vulnerable customers in FG21/1?
- A. That firms refuse to deal with them to avoid any harm
- B. That they always receive lower prices than other customers
- C. That they experience outcomes as good as other consumers
- D. That they are always served by a specialist team only
Show answer
C. That they experience outcomes as good as other consumers
FG21/1 says the FCA wants vulnerable consumers to experience outcomes as good as those of other consumers and to receive consistently fair treatment. Firms should adapt their approach rather than exclude vulnerable customers.
10. A broker discovers that one of its directors has been using client fees to pay personal debts, which could seriously damage the firm's reputation. When must the firm tell the FCA?
- A. In its next regular regulatory return
- B. Only once its internal investigation ends
- C. Immediately it becomes aware of the matter
- D. Only if a customer complains about it
Show answer
C. Immediately it becomes aware of the matter
SUP 15.3.1R requires a firm to notify the FCA immediately it becomes aware of, or has information reasonably suggesting, a matter that could have a significant adverse impact on its reputation. Waiting for a return, an investigation or a complaint would not meet this standard. The duty reflects Principle 11, which requires openness with the regulator.
Frequently asked questions
+Is the FOS free to use?
Yes, for consumers. The Financial Ombudsman Service is funded by the financial services industry through levies and case fees paid by firms. A complainant does not need a lawyer or claims management company to bring a complaint.
+Is the FOS decision binding?
Only if the complainant accepts it. Under section 228 of FSMA 2000, an accepted ombudsman decision is binding on both the firm and the complainant and is final. If the complainant rejects it, or does not reply by the deadline, it is not binding and they keep the right to go to court.
+Does the FSCS cover mortgages?
The FSCS does not cover a mortgage debt, because a mortgage is money you owe, not money you hold. It does cover bad mortgage advice and arranging from a failed firm, up to £85,000 per person, where the advice was given on or after 31 October 2004 and concerned your main home.
+What is the FSCS limit for joint accounts?
Each eligible account holder is protected up to £120,000 per authorised institution, so a joint account held by two people is protected up to £240,000 in total. The limit applies to firms failing on or after 1 December 2025.
+Does the FSCS cover bad mortgage advice?
Yes, if the firm that gave the advice has failed and cannot pay. The FSCS can pay up to £85,000 per person per firm for firms failing after 1 April 2019. If the adviser is still trading, the complaint goes to the firm and then the Financial Ombudsman instead.
+Who pays for the FSCS?
Authorised financial services firms pay for the FSCS through annual levies, split into funding classes by type of business. The scheme also recovers money from the estates of failed firms. Consumers do not pay to claim.
+How long does a firm have to respond to a complaint?
Eight weeks from receiving it, under DISP 1.6.2R. By then the firm must send a final response or a written explanation of why it needs more time, which also tells the customer they can go to the Financial Ombudsman now.
Keep reading
- CeMAP FRE2: Skills, Principles and Ethical BehavioursCeMAP FRE2 mock exam guide: the 40-question format, LO6 to LO8 in official order, the Consumer Duty link, common traps and a four-week plan.
- CeMAP 1: The FSRE Module and Its Two Unit Exams, FRE1 and FRE2CeMAP 1 is the FSRE module: two 40-question unit exams, FRE1 and FRE2, each 1 hour, pass 28/40. Syllabus, costs, old UKFR mapping and free mocks.
- The FCA, the PRA and UK Financial Regulation for CeMAP FRE1The FCA and PRA for CeMAP FRE1: the 1986–2021 timeline, statutory objectives, the Handbook, Principles for Businesses, SM&CR and enforcement powers.
- Anti-Money Laundering for CeMAP: The Regulations, POCA and MortgagesMoney laundering regulations for CeMAP FRE1 and FRE2: MLR 2017, POCA offences and sentences, due diligence, SARs, tipping off and mortgage red flags.
- CeMAP Tax Tables for 2026/27: Income Tax, Property Tax and AllowancesCeMAP tax tables for 2026/27: income tax, NI, SDLT, LBTT, LTT, ISA, pension, CGT and IHT figures plus FSCS and FOS limits, each with its official source.