Compensation will also be increased in line with inflation from April 2020, under the plans.

Any complaints referred to the ombudsman service before April 2019 will be subject to the limit of £150,000.

It’s thought there are around 2,000 complaints upheld by the ombudsman service each year where the amount of compensation the service determines is due is above the current award limit, the FCA said.

As a result, complainants could be losing out to the tune of around £113m a year.

FOS service rolled out to small businesses

The FCA has also confirmed plans to extend access to the FOS to more small and medium-sized firms, providing hundreds of thousands of firms an alternative route to court to seek redress.

It means small businesses with an annual turnover below £6.5m and fewer than 50 employees, or a balance sheet lower than £5m, will be able to refer complaints to the ombudsman.

Under the ‘near-final’ rules published today around 210,000 SMEs will be able to complain and get compensation.

Andrew Bailey, chief executive of the FCA said: “We recognise it is vitally important for SMEs to have a mechanism to resolve disputes and we are clear the Financial Ombudsman Service is the right route for this.

“The changes we are making are as far as we think we should go within our powers, but they will provide access to the ombudsman service for a significant number of smaller businesses. Before this their only option was potentially a costly legal one through the courts.

“The changes are an important extension of the ombudsman service’s role and remit.  We will work closely with them to ensure that they are ready, so that SMEs are able to benefit from the new rules as soon as they come into force.”

Final rules are expected to come into force in April next year.