The FCA, in partnership with HM Treasury and the Financial Ombudsman Service (FOS), have launched a proposed reform to the UK’s complaints handling and redress framework. These changes are more than administrative tweaks – they represent a strategic shift in how financial firms will be expected to engage with customer disputes, redress, and regulatory supervision.
For consumer credit firms, particularly those operating in BNPL, motor finance, high-cost short-term credit (HCSTC), general lending or credit broking, the implications are wide-ranging. From extended complaint time limits to recalculated compensation interest and faster FCA intervention, these proposals warrant urgent board-level attention.
Key Proposed Changes at a Glance:
- 10-year absolute time limit for referring a complaint to the FOS (with some exceptions for long-term products)
- Variable interest rate on redress payments: shifting from a fixed 8% to BoE base rate +1%
- Enhanced FCA powers to order mass redress schemes without lengthy consultations
- Mechanism to allow early clarification of rules before disputes escalate
- FOS to consult on differentiated case fees, incentivising firms to resolve complaints earlier
Consultation closes: 8 October 2025. Implementation could follow in 2026.
Why Do These Changes Matter to Consumer Credit Firms?
In a sector where affordability, fairness and customer vulnerability are already under the regulatory microscope, complaints aren’t just a reputational issue – they are a material business risk. These proposals raise the bar for how firms approach complaint resolution, legacy liability and ongoing compliance.
Buy Now, Pay Later (BNPL)
BNPL providers may face:
- Significantly longer exposure to legacy complaints, especially on affordability and disclosure
- Higher potential redress liabilities for historic agreements, now with floating interest calculations
- A need to review how disputes are documented and resolved internally, ahead of FOS referral
Motor Finance Providers
With the ongoing FCA probe into Discretionary Commission Arrangements (DCAs), firms are already bracing for mass claims. This new framework:
- Could accelerate FCA-imposed mass redress without prior consultation or delay
- Increases urgency for motor lenders to enhance internal complaint protocols and redress forecasting
High-Cost Short-Term Credit (HCSTC) & General Lending
- Exposure to complaints over historic lending practices is now extended to 10 years
- Changing the basis of interest from 8% to base +1% may reduce financial provision risks in low-rate environments, but also introduces forecasting volatility
- Firms must act to improve their root cause analysis and complaint record-keeping
Credit Brokers
- Brokers may see increased pressure to respond to complaints arising from lender conduct where the broker was involved in the sales process
- Must review their introducer agreements, sales documentation, and ensure audit trails are watertight
- Need to anticipate differential case fees, which could increase costs where complaints escalate
Key Timelines and What to Expect
| Event | Date / Period |
| Call for input closes | 8 October 2025 |
| FCA & FOS Policy Statements | Late 2025 |
| Implementation window | From mid-2026 onwards |
| FOS fee consultation | Summer 2025 (proposed) |
Now is the time for firms to undertake pre-implementation planning. The direction of travel is clear: more accountability, longer exposure, and earlier intervention.
Practical Impacts Across the Business
Regulatory Compliance:
- Complaint policies and DISP procedures must be updated to reflect 10-year limits and new interest rates
- Recordkeeping policies need to ensure evidence from up to a decade ago is accessible and reliable
Financial Forecasting:
- Redress provisioning must now account for potentially lower or more volatile interest costs
- Scenario modelling should reflect the risk of mass redress actions with shorter FCA lead times
Operational Readiness:
- Complaint handling teams need updated training and scripts
- CRM and complaints systems should be reviewed for functionality against extended timelines
Risk & Governance:
- Boards should receive risk briefings, and oversight frameworks must evolve to track legacy and forward-looking exposure
- Governance documentation should reflect readiness for regulatory intervention or thematic reviews
How ALPH Legal & Compliance Can Help
ALPH Legal & Compliance are specialist in supporting FCA-regulated firms through compliance challenges, transformation, and regulatory scrutiny.
We can assist your firm by:
- Conducting complaints compliance audits to benchmark your DISP process and redress controls.
- Designing and updating complaint-handling policies, customer-facing procedures and internal protocols.
- Training front-line teams on early resolution techniques, complaint documentation and fair outcomes.
- Supporting your financial planning team to recalibrate redress provisions and assess exposure.
- Helping you engage proactively with the FCA or FOS under the new early query mechanisms.
- Preparing for potential mass redress exposure, including operational and governance responses.
- Our team brings extensive knowledge of how the FCA approaches consumer credit complaints and redress themes. Whether you’re a BNPL disruptor, an established motor finance group, or a niche broker, we can ensure your firm is compliant, confident and customer-ready.
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With all the regulatory shifts on the horizon, now is the time to act. Don’t wait until compliance gaps appear—engage with ALPH Legal & Compliance today to ensure your firm is ahead of the curve. Whether you need tailored guidance, compliance support, or strategic insights to drive new business, ALPH Legal & Compliance is your trusted partner in navigating FCA regulations with confidence.
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