Complaints, Harm and Reporting: A Busy FCA Week

Unknown Speaker

Hello and welcome to Beyond the Buzz Podcast. I’m Vicky, and I’m joined by Rachel. Grab a brew, settle in, and we’ll go through some important updates today.

Rachel MacRae

Thanks, Vicky — and yes, there’s a lot to unpack here, more than I think we can get in one episode! The first thing that stands out is the push for a complaints journey that feels clearer and more predictable; but one of the biggest changes is this new registration stage at the FOS, which would act as an early checkpoint before a complaint moves into full investigation.

Unknown Speaker

Which, on paper, makes a lot of sense. If the case isn’t evidenced properly, or it’s premature, then stopping it early should reduce delays later on. The FCA and FOS clearly think that this will filter out weaker or not-yet-ready cases and, importantly, encourage firms to resolve issues earlier themselves instead of everything drifting straight into a longer ombudsman process.

Rachel MacRae

Yes, and that early-stage filter could change behaviour on both sides. Consumers get a clearer sense of what’s needed, and firms get a nudge to sort things before they escalate. I mean, nobody in complaints handling has ever said, “You know what this needs? More uncertainty.” So clarity at the start is a pretty sensible aim.

Unknown Speaker

Quite. Alongside that, the FOS is also proposing updates to its dismissal grounds. And these are quite targeted. So it may be able to dismiss cases where complainants act abusively, where the matter is more appropriate for the courts, or where the firm has already completed an appropriate regulatory review or consumer redress scheme.

Rachel MacRae

That last one is especially interesting, because it points to trying to avoid duplication. If a firm has already carried out the right kind of regulatory review or consumer redress scheme, the FOS may not need to reopen the same terrain. It feels like part of the same broader push toward a process that’s a bit more structured and, dare I say, controlled.

Unknown Speaker

Steady on, Rachel. “Controlled” in complaints can be a dangerous word. But yes, more structured is fair. The consultation also looks at the FOS’s “fair and reasonable” test. The proposed change here is to clarify that decisions will be based on the standards in place at the time of the act or omission. And they want to remove references to “good industry practice” to reduce subjectivity.

Rachel MacRae

Which is a really significant clarification. Because once you start leaning on broad ideas like “good industry practice”, you can end up with a lot of interpretation. Removing that reference should, at least in theory, make the basis for decisions more grounded in the standards that actually applied at the relevant time, rather than something looser or more retrospective.

Unknown Speaker

Exactly. And staying with the FOS, the Treasury has also confirmed plans to introduce a new 10-year time limit for bringing complaints. But this is important: it won’t be a hard stop in every case. The FCA will have the power to make exceptions where appropriate, so consumers with legitimate reasons for delays aren’t unfairly shut out.

Rachel MacRae

That caveat matters, doesn’t it? Because a time limit brings certainty, but if it were completely rigid, that could create its own unfairness. So the proposal is trying to balance a clearer framework with flexibility where it’s genuinely needed.

Unknown Speaker

And that, really, is the thread running through all of this: consistency, fairness, and how that sits alongside the FOS’s long-standing case-by-case judgment approach. It’ll be interesting to see how that balance is struck in practice, because it’s one thing to design a neater framework and another to apply it in real complaints.

Rachel MacRae

Absolutely. Consultation responses are invited by the 11th May 2026, with further policy updates expected later in the year. So this is very much one to watch, especially for firms thinking about how complaints readiness, evidence and early resolution may need to evolve.

Rachel MacRae

The next update we have is some Final Guidance from the FCA; we are talking about FG26/2, which is all about identifying, assessing and rectifying consumer harm without waiting for customers to complain. And that really is the heart of it: don’t sit there waiting for the complaints file to tell you something has gone wrong.

Unknown Speaker

Yes, exactly. The guidance reinforces existing requirements under DISP, PRIN and the Consumer Duty, and it gives practical examples of what good and poor practice look like across the lifecycle of a redress exercise. So it’s not creating a brand new universe, but it is setting out clearer expectations on how firms should behave when they spot harm, especially systemic or recurring issues.

Rachel MacRae

The FCA expects strong systems and controls to identify emerging issues early. That means firms should be reviewing complaints data, customer feedback and other insights on a regular basis, and they should be doing effective root cause analysis. Not just counting issues, but actually asking what’s driving them.

Unknown Speaker

And once a potential issue is identified, firms are expected to assess the scale of impact, think about vulnerable customers, and decide what remedial action is appropriate. That may include a firm-led redress exercise. So the message is pretty clear: if you identify a problem, you’ve then got to work through impact, population, remedy and delivery. You can’t just admire the issue from a safe distance.

Rachel MacRae

Lovely phrase. But yes, this guidance is very practical in that sense. It also puts a lot of emphasis on governance. Senior management should be involved in scoping issues, approving remedial action and monitoring progress. So this isn’t meant to sit quietly in a corner of the business as a technical clean-up job.

Unknown Speaker

No, and I think that’s crucial. Good governance is one of the main themes running through it. If senior management is involved at the right points, then decisions about the scope of harm, the proposed remedy and the progress of the exercise should be better controlled and properly accountable.

Rachel MacRae

Then there’s communication, which the FCA has really highlighted. Firms should communicate clearly, fairly and accessibly with affected consumers. That includes transparent explanations of what’s happened, how customers may be impacted and what they need to do, if anything. And that last bit matters, because sometimes the best communication is the one that makes the next step obvious rather than turning it into a treasure hunt.

Unknown Speaker

Very true. The guidance also encourages firms to test customer communications, consider opt-out approaches to maximise inclusion, and provide additional support for vulnerable consumers. That gives you a sense of the FCA’s overall expectation here: not just technically correct redress, but redress that people can actually understand and access.

Rachel MacRae

And finally, the FCA reminds firms about record keeping. They should maintain thorough records of their analysis, decisions, customer communications and outcomes. That supports monitoring, helps show whether the redress exercise met its objectives, and feeds into continuous improvement for the future.

Unknown Speaker

Which, in compliance terms, is the least glamorous but often the most revealing part. If the records are poor, it becomes very difficult to show why decisions were made or whether the exercise was effective. So monitoring and documentation aren’t optional extras tagged on at the end.

Rachel MacRae

Exactly. Overall, firms are strongly recommended to read the full guidance. It’s one of those publications where the regulator is saying, very politely but very clearly, “Please be proactive, and please be able to prove that you were.”

Unknown Speaker

That’s a very Rachel summary that. But yes, proactive identification of harm, proper assessment, governance, good communications, support for vulnerable consumers and solid records. That’s the package.

Unknown Speaker

Right, let’s round things off with reporting, wholesale markets, and the ever-growing reading list. First up is PS26/2. The FCA has confirmed new rules on reporting significant operational incidents and material third-party arrangements. These changes were developed jointly with the PRA and the Bank of England, and they’re aimed at improving consistency and giving regulators a clearer view of risks as firms rely more on external providers and more complex technologies.

Rachel MacRae

From the 18th March 2027, firms in scope move to a single, aligned reporting regime. For operational incidents, the FCA has defined what counts as a reportable event, set common thresholds, and introduced streamlined reporting through a unified portal. Most solo-regulated firms will use a short standard report, while a smaller group of systemically important firms will have enhanced, phased reports.

Unknown Speaker

And for third-party arrangements, firms will need to notify the FCA about any new or significantly changed material arrangements, and maintain an annual register. So the direction of travel is clearer reporting, more consistency and, unsurprisingly, better visibility for regulators. Always a crowd-pleaser.

Rachel MacRae

Everyone’s favourite phrase. Alongside the main policy statement, the FCA also published supporting documents and annexes, including the annexes to the full PS26-2 statement, FG26-3 on operational incident reporting, and FG26/4 on material third-party reporting. We’re told there’ll be a deeper dive next week, but for now firms should familiarise themselves with the materials.

Unknown Speaker

Then there’s the FCA’s latest Wholesale Markets Regulatory Priorities report, which replaces the old portfolio letter format. The FCA says this reflects a shift toward being a “smarter regulator”, with clearer expectations, more targeted supervision and a strong outcomes-focused approach.

Rachel MacRae

For wholesale market participants, the report highlights core priorities including stronger operational and financial resilience, better trading controls, and improved liquidity management. It also sets out the wider reform programme to create more efficient, competitive and innovative markets, including work on consolidated tapes, T+1 settlement, dematerialisation of shares, and streamlining listing and transparency rules.

Unknown Speaker

There’s also a strong focus on the safe and responsible adoption of technology, including AI, digital assets and distributed ledger technology. The FCA is encouraging firms to engage with sandboxes and innovation pathways, but it’s also very clear that governance, testing and oversight have to keep pace with emerging risks.

Rachel MacRae

And, as you’d expect, preventing financial crime and market abuse remains right near the top of the list. The FCA points to ongoing weaknesses in AML frameworks, market abuse surveillance and data quality, and says supervisory and enforcement activity will continue to increase in those areas.

Unknown Speaker

Plus robust conflict-of-interest management and conduct oversight. Poorly managed conflicts undermine trust and market integrity, and the regulator is planning several multi-firm reviews over the coming year looking at governance, remuneration structures and trading practices. So overall the message is continued reform, a more agile supervisory model, and an expectation that firms proactively strengthen systems, controls, governance and resilience.

Rachel MacRae

And just briefly on the “to read” pile, because it has been a busy week, the FCA also issued finalised guidance on operational incident reporting, that’s FG26-3, and material outsourcing or third-party reporting, FG26-4. It published a Regulatory Priorities Report for the consumer finance sector, launched a market study into later-life mortgages, and released a call for input on how its framework can better support SMEs in accessing finance.

Unknown Speaker

So if anyone was worrying the Easter break might be too restful, the FCA has stepped in magnificently. But genuinely, those publications are worth a look if they’re relevant to your business, and we’ll be covering more of them in due course.

Rachel MacRae

That’s it for this one. A lot of focus on clearer frameworks, stronger governance and better reporting, which does at least make the direction of travel fairly obvious.

Unknown Speaker

It does indeed. Thanks, Rachel.

Rachel MacRae

Thanks, Vicky.

Unknown Speaker

And thanks for listening. Bye for now.

Rachel MacRae

Bye.