On 16 March 2026, the Financial Conduct Authority (FCA) and the Financial Ombudsman Service (FOS) published Consultation Paper CP26/9, alongside finalised guidance FG26/2 on identifying and rectifying harm. This latest step suggests the most far-reaching overhaul of the UK’s consumer redress framework in a generation, and it has real, immediate consequences for how financial services firms manage complaints, identify emerging harm and report to the regulator. The consultation closes on 11 May 2026.
For firms and compliance leaders impacted, this consultation is not one to delegate and forget. The direction is set, with several elements already taking effect, and the regulator has made plain that it expects firms to be preparing now.
Why the redress system is being overhauled
The current system has struggled under the weight of large-scale complaint events. The Payment Protection Insurance (PPI) scandal resulted in £38.3 billion paid to 34.4 million consumers; motor finance is now creating a similar strain. Complaint volumes overwhelm firms and the FOS alike, leading to inconsistent outcomes and prolonged uncertainty for consumers and firms. The regulator has been direct: this is not just a compliance problem – it is an economic one, with consequences for investment and UK competitiveness.
CP26/9 responds with three goals:
- greater predictability in redress outcomes;
- earlier identification and proactive resolution of harm;
- and improved operational efficiency across the FOS and regulated firms.
These goals are reinforced by the Consumer Duty, which already requires firms to identify and address foreseeable harm to retail customers. The modernised redress framework makes clear that the regulator will hold firms to that obligation.
The key proposals firms need to understand
Four areas will have the most direct impact on compliance teams and senior leaders.
Anchoring the FOS ‘fair and reasonable’ test
Where FCA rules are material to a complaint, demonstrating compliance with those rules, consistently with the regulator’s intent, will mean a firm has acted fairly and reasonably. This creates a clearer safe harbour but requires firms to evidence not just what they did, but why it aligned with the regulatory intent. Root cause analysis and complaints data must be tightly connected to the compliance framework.
A formal framework for mass redress events (MREs)
A six-criteria framework will define when an issue qualifies as an MRE. The FCA gains new powers to pause Dispute Resolution: Complaints (DISP) timescales, direct the FOS to refer cases back to firms, and apply a more proportionate test before triggering a Section 404 consumer redress scheme.
Clearer SUP 15 notification thresholds
Clarificatory guidance is being added to Supervision sourcebook 15.3.8G (SUP 15). Indicative notification triggers include:
- an issue affecting more than 40% of consumers in a product line;
- potential redress liability exceeding £10 million or 50% of annual product revenue;
- or average individual impact over £10,000.
Firms must notify even where thresholds are not formally met if they believe a reportable issue exists.
A new FOS complaints registration stage
Before a complaint reaches investigation, the FOS will assess whether a Final Response Letter (FRL) has been issued and whether minimum evidential standards are met. This filters out poorly evidenced complaints before case fees are incurred, yet it raises the quality bar on FRLs significantly.
Seven actions your firm should take now
A Policy Statement confirming final rules is expected later in 2026, but firms should not wait for it. Here is what firms should prioritise today.
- Audit your complaints handling framework.
Review policies, escalation processes and FRL quality against the new expectations. Use the good and poor practice annex in FG26/2 as a self-assessment tool.
- Map your SUP 15 notification processes.
Assess whether your current data and systems can detect emerging issues against the proposed notification thresholds at the product line level in near real time.
- Strengthen root cause analysis (RCA).
The framework places significant weight on early pattern detection. Review whether your RCA process is rigorous enough to surface systemic issues before they become reportable events.
- Connect Consumer Duty monitoring to redress governance.
Outcomes monitoring that identifies potential consumer harm must feed directly into your SUP 15 assessment and RCA processes. If these are operating in silos, that is a gap to close now.
- Elevate redress to board level.
Establish a cross-functional redress risk forum with senior manager accountability and board reporting. The question for boards is whether your firm would identify and self-report an emerging MRE, before the regulator does.
- Invest in complaints data and management information (MI).
Legacy systems that report retrospectively or lack product-line granularity will not meet the new expectations. Better MI pays a direct regulatory dividend.
- Respond to the consultation by 11 May 2026.
The FCA and FOS are actively seeking views on proposed changes to the ‘fair and reasonable’ test, the MRE framework and the registration stage. Engaging now is an opportunity to shape the final rules.
The bigger picture
These reforms sit within a broader regulatory shift. The FCA is moving towards a ‘show me, don’t tell me‘ approach to supervision, and redress governance is one of the clearest areas where that is being felt. Firms with strong complaints frameworks, joined-up Consumer Duty monitoring and genuinely proactive governance will be better placed – commercially as well as regulatorily. Boards and investors are increasingly attentive to conduct risk and redress exposure. Getting ahead of this is not just about compliance; it is about the predictability and resilience that good governance delivers.
How TCC can help
At TCC, we help FCA-regulated firms across retail banking, consumer credit, wealth management and insurance build the governance, data and processes needed to meet regulatory expectations and deliver good customer outcomes. In the context of the redress reforms, we provide complaints framework gap analysis, SUP 15 notification process reviews, root cause analysis and MI improvement, Consumer Duty and redress governance alignment, and proactive redress exercise support from scoping through to execution.
If you would like to discuss what CP26/9 means for your firm, get in touch with our regulatory experts.
