The Finance & Leasing Association (FLA) has published new independent research that reveals the UK is an international outlier in its approach to consumer credit regulation and alternative dispute resolution (ADR), with far-reaching implications for legal certainty, business confidence, and sector growth.

Commissioned by the FLA and conducted by global law firm Eversheds Sutherland, the report was unveiled at the FLA’s Annual Insights Conference. It compares the UK’s framework to those in France, Germany, Italy, Poland, and New York State — all jurisdictions with comparable market scale or regulatory complexity. The findings highlight significant divergences, particularly in how consumer disputes are handled.

Navigating Consumer Credit Regulation: A UK and OECD Comparison

The report shows that the UK is unique in allowing its Financial Ombudsman Service (FOS) to decide complaints based on what it considers “fair and reasonable,” even where firms have complied with legal and regulatory requirements.

The UK is also alone in requiring firms to apply previous FOS decisions to future similar cases, effectively granting the Ombudsman a quasi-regulatory function not seen in any of the other jurisdictions assessed.

This structural feature — which the report argues creates uncertainty, inconsistent outcomes, and mass complaints activity — echoes concerns raised earlier by the House of Lords Financial Services Regulation Committee. In a recent report, the Committee warned that the FOS’s role as a “de facto regulator” was constraining financial sector innovation and damaging the UK’s global competitiveness.

Stephen Haddrill, Director General of the FLA, said: “This research provides long-overdue, independent analysis comparing the UK’s framework with that of our peers — and the message is clear. The UK system is more complex, less predictable, and uniquely exposed to claims management activity.”

He continued: “The combination of inconsistent FOS decision-making and a binding precedent model turns the complaints system into something it was never designed to be. While reforms to the Consumer Credit Act and the Ombudsman are in motion, this report makes clear that much deeper structural change is needed.”

The study also reveals that, in contrast to the UK, ombudsmen in all other jurisdictions assessed are legally bound to apply the law in resolving complaints — a limitation that provides greater clarity for both consumers and firms. The research further suggests that this legal certainty makes those systems less attractive to claims management firms, which have proliferated in the UK.

Chris Busby, UK Head of Financial Services Disputes at Eversheds Sutherland and co-author of the report, commented: “This work highlights the UK’s distinct and, in many respects, more burdensome approach to consumer credit oversight. At a time of regulatory review — including in areas like buy-now-pay-later — we hope these findings will inform a more balanced, sustainable model for both firms and consumers.”