Third-party claims firms are using AI to flood the ombudsman with bulk submissions — and the real complaint is getting lost
Britain’s Financial Ombudsman Service (FOS) is picking up the phone. AI-generated complaints are burying the facts under fabricated references. The service has made direct telephone contact its first line of defence.
For mortgage professionals, the pattern signals a compliance risk that reaches into how clients and third-party claims firms communicate on their behalf.
Speaking to the Financial Times, chief ombudsman James Dipple-Johnstone described a case that illustrated the scale of the problem. In that submission, 37 out of 39 references were “incorrect in terms of the complaint as put.”
“The AI can hallucinate, it can draw the wrong conclusions and sometimes the individual’s complaint can get lost in the mix in terms of that additional material that’s put in,” Dipple-Johnstone said.
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What is the FOS seeing from AI-generated complaints?
Third-party claims firms and solicitors are using AI to produce bulk submissions for complainants. Some of those submissions run to more than 200 pages. The FOS found that as many as one in three responses to its early case assessments appeared to have been AI-generated or substantially AI-assisted.
The problem is not isolated to the FOS. It sits within a broader pattern of AI-written submissions overwhelming UK public institutions, from courts to regulatory bodies.
For mortgage brokers and lenders, this sits within a framework of heightened complaints scrutiny. The FOS is not yet reporting a surge in mortgage-specific AI submissions.
The counter-strategy is intentionally personal. Caseworkers are now calling customers earlier to get to the substance of their grievance before the AI noise takes hold. “Our initial response has been to roll out more telephone contact with customers to make sure that we get to the heart of the dispute,” Dipple-Johnstone said.
That move — back to the phone, back to conversation — carries a lesson for the wider financial services sector. The relationship between a customer and their adviser, broker, or lender remains the most reliable mechanism for resolving misunderstanding. No algorithm has yet improved on a clear, direct exchange between two people who understand what is at stake.
What does the car finance backlog mean for mortgage brokers?
For mortgage brokers with live FOS cases, a service stretched across additional car finance claims means longer resolution timelines and less caseworker bandwidth. If AI-assisted submissions accelerate at the same time, the pressure on the service becomes overwhelming.
The AI hallucination problem adds urgency to that backlog. The FOS already holds almost 100,000 car finance complaints, and the issue has preoccupied the service and the Financial Conduct Authority (FCA) for the past year.
Dipple-Johnstone said several hundred thousand more could arrive if the FCA’s proposed £9.1 billion redress scheme is blocked. That scheme is currently facing legal challenge, with a hearing scheduled before the Upper Tribunal in December 2026 or February 2027.
Were it to be blocked, the resulting caseload would rival the PPI mis-selling era. The FOS handled almost one million payment protection insurance claims over the past decade.
Early use of AI within the FOS itself has already halved the time taken for certain internal processes. The service is also hiring and expanding its contractor base. But Dipple-Johnstone was clear that human judgment sits at the centre.
“The decisions themselves will always be taken by human beings, but we’ve been looking at how technology can put us in the best place to be as efficient as possible while still providing a high-quality service for consumers,” he added.
Where does accountability sit for mortgage brokers?
For brokers managing their own client relationships, the FOS experience is a broader reminder. AI fraud risks in the UK mortgage market extend well beyond origination, raising compliance questions at every stage of the customer journey. Inaccuracy in AI-assisted communications — whether from clients or from third-party claims firms — creates downstream exposure.
The FCA has confirmed it will not introduce new AI-specific regulation. It is relying instead on existing frameworks, including the Consumer Duty and the Senior Managers and Certification Regime (SM&CR).
