Internal Complaint vs Ombudsman Referral

Understanding when to use an organisation's internal complaints procedure and when to escalate to an Ombudsman.

Overview

Almost every regulated organisation — banks, insurers, NHS bodies, local authorities, housing associations, and utilities — has a formal internal complaints procedure. Ombudsman schemes (Financial Ombudsman Service, Local Government and Social Care Ombudsman, Housing Ombudsman, Parliamentary and Health Service Ombudsman, etc.) provide a second tier of independent review. The two stages are sequential: you must exhaust the internal process before the Ombudsman will accept your complaint.

Side-by-Side Comparison

Internal Formal Complaint

Cost: Free

Time: Usually 8 weeks for financial services; up to 3 months for complex NHS complaints

Pros

Quick — most complaints are resolved within 8 weeks
Free
Gives the organisation a chance to resolve the matter without external involvement
Completion of the internal process is a prerequisite for the Ombudsman

Cons

The organisation investigates itself — lack of independence
Outcome may simply repeat the original decision
No financial compensation unless the organisation decides to pay

Best For

All complaints — this is always the first step before escalating to an Ombudsman.

Ombudsman Referral

Cost: Free

Time: 3 months–2 years

Pros

Completely independent of the organisation
Free for consumers
Can award compensation for distress, inconvenience, and financial loss
Decisions are binding on the organisation if accepted by the complainant (FOS, Housing Ombudsman)

Cons

Cannot refer until internal process is complete (usually 8 weeks minimum)
Ombudsman schemes are limited to specific sectors and types of complaint
Process can be slow — complex cases take 12–24 months
Compensation levels may be lower than a court could award

Best For

Cases where the internal complaint has produced an unsatisfactory outcome, and the complaint falls within the Ombudsman's jurisdiction.

Key Differences

AspectInternal Formal ComplaintOmbudsman Referral

IndependenceNone — the organisation investigates itselfFully independent

PrerequisiteNone — this is the first stepInternal process must be exhausted first

Speed8 weeks (financial); up to 3 months (NHS)Months to years

CompensationOnly if the organisation agrees to payYes — binding on organisation if consumer accepts

JurisdictionCovers any complaint against that specific organisationLimited to sector-specific jurisdiction and types of complaint

Our Recommendation

Always complete the internal complaints process first — it is a prerequisite for the Ombudsman and may resolve the matter quickly. Keep records of every communication, note the date you submitted the complaint, and request a written response. If the organisation does not resolve the complaint within 8 weeks (financial services), you can go to the FOS immediately even without a final response. Use the specific Ombudsman for your sector: FOS (financial), LGSCO (local government), Housing Ombudsman (social housing), PHSO (NHS, government departments).