The UK government plans to significantly reduce the powers of the Financial Ombudsman Service following accusations it overstepped its mandate. Authorities grew concerned after the service positioned itself as a "quasi regulator" during high-profile cases, particularly in the multibillion-pound motor finance scandal where it expanded its authority beyond traditional dispute resolution.

The motor finance scandal represents one of the largest consumer finance controversies in recent British history, with potentially billions at stake. Financial institutions have complained that the Ombudsman took enforcement actions typically reserved for regulators, creating uncertainty about legal standards and compliance requirements across the sector.

Business leaders welcomed the proposed curbs, arguing they would restore clearer boundaries between dispute resolution and regulatory enforcement. The changes could reshape how financial disputes are handled in the UK, potentially limiting the Ombudsman's ability to impose rulings that carry quasi-regulatory weight in similar future cases.