Modernising consumer redress: What FCA CP26/9 means for firms

What happened?

The FCA and Financial Ombudsman Service (FOS) have published Consultation Paper CP26/9 alongside finalised guidance FG26/2, setting out proposals to modernise the UK’s consumer redress framework. The reforms aim to make redress outcomes more predictable, improve the identification and resolution of consumer harm, and increase efficiency across firms and the FOS. Several elements are already taking effect, with the consultation closing on 11 May 2026.

Why does it matter?

This is one of the most significant overhauls of the UK’s consumer redress system in decades. The FCA is responding to the challenges created by large-scale complaint events such as PPI and motor finance, where high complaint volumes have led to delays, inconsistent outcomes and uncertainty for both firms and consumers.

The proposals strengthen expectations around proactive harm identification, complaints management and regulatory reporting. Firms will increasingly be expected to demonstrate how they identify, assess and remediate customer harm, rather than simply react to complaints after the event.

Who is affected?

The reforms affect all FCA-regulated firms serving retail customers, including banks, building societies, consumer credit providers, insurers, wealth managers, investment firms and mortgage lenders. Compliance teams, complaints functions, risk and governance specialists, Consumer Duty leads, senior managers and boards will all have a role in ensuring their organisations are prepared for the new requirements.

Key risks

• Inadequate complaints frameworks that fail to meet enhanced FCA and FOS expectations.
• Weak root cause analysis processes that do not identify emerging patterns of consumer harm.
• Failure to detect and report issues that could trigger SUP 15 notification requirements.
• Poor-quality Final Response Letters that do not meet the new FOS registration standards.
• Siloed Consumer Duty, complaints and redress governance processes.
• Insufficient management information and complaints data to identify systemic issues early.
• Increased regulatory scrutiny where firms cannot evidence compliance with FCA rules and regulatory intent.

Actions to take

• Review complaints handling policies, governance arrangements and escalation processes against FG26/2.
• Assess the quality and evidential robustness of Final Response Letters.
• Map existing SUP 15 notification processes against the proposed reporting thresholds.
• Strengthen root cause analysis capabilities to identify potential systemic issues earlier.
• Connect Consumer Duty outcomes monitoring with complaints, redress and regulatory reporting frameworks.
• Establish board-level oversight and senior manager accountability for redress risk.
• Improve complaints data, management information and trend analysis capabilities.
• Consider responding to the consultation before the deadline to help shape the final rules.

Wider implications

These reforms reflect a broader regulatory shift towards earlier intervention and evidence-based supervision. The FCA is increasingly expecting firms to identify and resolve customer harm before issues develop into large-scale remediation exercises. As Consumer Duty expectations continue to evolve, complaints and redress data will become an increasingly important source of evidence for demonstrating good customer outcomes.

Recommendations

Firms should treat redress governance as a strategic issue rather than a complaints function responsibility alone. Boards should assess whether their governance structures, data capabilities and oversight arrangements would enable them to identify a potential mass redress event before the regulator does.