Recommendation 153

In practice, the application of the fair and reasonable test can mean that the FOS makes judgements that extend beyond, or diverge from, the FCA rules. 229 The FCA’s Handbook also requires regulated firms to ensure that lessons learned as a result of FOS determinations are effectively applied in future complaint handling, which some have described as, in effect, precedent setting, imposing quasi-regulatory obligations on firms. 230 In addition, witnesses told us that the operation of the “fair and reasonable” test also creates the risk that past business practices, although permissible under the FCA rules, may be deemed unfair and subject to redress at a later date.