Context
The FCA’s strategy notes that the current redress regime can create uncertainty for consumers, firms and investors. As such, it wants to achieve greater predictability, certainty and transparency, with appropriate responsibility for firms to identify and address redress issues early on.
This latest consultation follows the FCA’s November 2024 joint Call for Input and July 2025 consultation with the FOS.
Alongside the new consultation, the FCA is also finalising a number of the proposals it consulted on: in July 2025:
- Finalised guidance FG26/2, which includes good and poor practice on identifying and rectifying harm.
- Guidance in SUP 15 clarifying when firms should report emerging issues to us.
- Rule changes for improved efficiency by the Financial Ombudsman and the Financial Services Compensation Scheme.
In an associated blog, Charlotte Clark, Director of cross-cutting policy and strategy, says a redress system works best when it is clear, simple to use and trusted – both by the consumers who rely on it when something goes wrong, and by the firms expected to put things right.
Key points to note and next actions
Finalised Guidance
The finalised guidance relates to ‘redress exercises’ of any scale and refers to firms taking proactive steps, including deciding whether it owes remedial action to customers and providing affected customers with necessary remedy without them needing to make a complaint. The objectives of the guidance are to highlight good and poor practice to:
- Help firms proactively identify potential consumer harm.
- Help firms take appropriate steps to resolve this harm, including proactively offering appropriate redress.
- Encourage a more consistent approach between firms for firm-led redress exercises.
- Provide guidance on appropriately communicating with consumers on these exercises, so they understand what they need to do and what to do if they are unhappy with the outcome.
The guidance supplements the Consumer Duty (‘the Duty’) guidance in FG22/5 Final non-Handbook Guidance. Firms may also find it helpful to read it in conjunction with the good practice and areas for improvement examples on complaints and root cause analysis published in December 2024.
Additional Consultation
The consultation seeks views on further changes possible within the existing framework, including proposed updates to the fair and reasonable test and to the dismissal grounds. The Financial Ombudsman is also seeking views on the introduction of a complaints registration stage to ensure that all complaints referred to the Financial Ombudsman are within its scope and ready to be investigated before being allocated a caseworker and businesses are charged.
The proposals seek to ensure that the Financial Ombudsman can resolve complaints more quickly and informally, leading to faster and more consistent resolutions, reduced delays and improved outcomes for all parties. The proposals will also encourage earlier proactive resolution of issues by firms. The Treasury has also published the outcome of its review into the Financial Ombudsman, which should be read alongside the consultation.
Blogging about the changes to the redress system, Charlotte Clark says “We’re delivering change at speed by acting now within our current powers, with a focus on improving how the system works in practice. This includes a new registration stage for complaints, updated dismissal grounds and clearer guidance on the fair and reasonable test.”
“Throughout, our aim has been to improve alignment, predictability and early engagement across the system – while maintaining strong and effective consumer protection.”
“For consumers, this means a smoother and more effective journey when problems arise, with complaints handled promptly by their financial services firm, and fair and fast compensation where it’s due…A system that enables earlier identification of harm, better coordination and clearer expectations should help reduce unnecessary delay and uncertainty for consumers, and support more consistent outcomes.”
“For firms, greater alignment between the FCA and the Financial Ombudsman, alongside clearer routes for early engagement when issues arise, should provide more confidence and predictability. Our changes will help firms understand when to escalate issues, what information is needed, and how wider redress concerns are likely to be approached – supporting better decision making and earlier action.”