Regulatory Round-up - January 2026

Motor Finance Redress Scheme

Prior to the New Year, the FCA were moving quickly to assess how a redress scheme would work in practice. The FCA aim to publish their decision on whether or not to introduce a redress scheme soon and if they do move forward, the Policy Statement and Final rules will be published between late February and late March.

There have been some minor changes since the opening of the Consultation:

• The date for firms sending final responses to all relevant DCA and non-DCA commission complaints has been brought forward to 31 May 2026 rather than 31 July 2026.

• Some minor amendments have been made to correct the compensatory interest rate and rounding errors in the example calculation in Consultation Paper table 9.

The decision to make public their investigation into a claims management company following concerns about its advertising and sales tactics in relation to potential motor finance claims signals just how seriously the FCA is taking this issue. While the FCA has not yet reached a decision on the case, it is drawing the public’s attention to some claims that may be made by claims management companies, including the amount of redress they could obtain, whether they were told they could make a claim for free and whether they were pressured to sign up. This is also an example of the FCA using their name and shame powers!

Non-Financial Misconduct

The December Policy Statement sets out Guidance on tackling non-financial misconduct (NFM) and how it will fit into COCON and FIT.

Importantly, the meaning of the term will differ slightly between COCON and FIT for those subject to FIT, particularly Senior Managers. There is a clear boundary between personal and professional life for COCON, whereas the FCA note that issues or events in individuals’ personal lives may need to be taken into account “where determining a person’s honesty, integrity and reputation” for a FIT assessment.

Coming into effect on 1 September 2026, COCON will be extended to include incidents of work-related NFM. The Guidance will appear in COCON in a separate section. The FCA have deliberately used the terms ‘bullying’ and ‘harassment’ to describe unwanted conduct that has the purpose or effect of violating a colleague’s dignity or creating an intimidating, hostile, degrading humiliating or offensive environment for them.

Removing References to Principles 6 and 7

The FCA propose to update and remove references to Principles 6 and 7 and Treating Customers Fairly. Post-Consumer Duty, Principles 6 and 7 do not apply to a firm’s activities where the Consumer Duty applies, and the FCA is aiming to update references to them to reduce confusion. The FCA wants to remove publications referring to TCF as they no longer apply.

They have confirmed that the Guidance for the Fair Treatment of Vulnerable Customers will not be removed but state that firms should be aware that where there are references to Principles 6 and 7, firms should be aware of the inherent limitations of the guidance and understand that the Duty imposes a higher standard.

Changes to FCA reporting

The FCA is consulting on reducing the frequency of the Baseline Financial Resilience Report where firms also submit Section A of the Retail Mediation Activities Return (RMA-A) and have annual revenue from in-scope regulated activities of £150m or less. If the proposal goes ahead, these firms will only need to submit FIN073 annually.

Changes to DISP 1.10 and 1.10A have been confirmed in Handbook Notice 136.

From 31 December 2026, firms must provide the FCA with a complaints report twice a year, which are to be submitted within 30 business days of the end of relevant reporting periods.

If a firm reports 500 or more complaints, it must publish a summary of the complaints data. If the firm has limited permission and it reports 1000 or more complaints it must publish the total number of complaints received.

The FCA are also proposing to reduce the administration fee for overdue or late regulatory data returns from £250 to £100. The FCA will confirm any changes by the end of March 2026.

Targeted Support

The ICO and FCA have issued a joint statement on targeted support and direct marketing. The aim is to ensure that customers receive timely and relevant information to support decisions about finances, while having their direct marketing preferences and data protection rights respected.

The statement confirms that, for targeted support, firms will need to process personal information to align customers with a particular consumer segment before sending tailored messages, and must comply with UK GDPR, the Data Protection Act and PECR, for example by:

• Upholding data protection principles, including being transparent and fair with consumers about what you want to do with their personal information.

• Having a valid lawful basis for processing personal information, and an additional condition if processing any special category data.

• Respecting individuals’ information rights, including their right to be informed about the processing of their personal information, rights concerning automated decision making and their absolute right to object to direct marketing.

• Not sending electronic mail marketing unless individuals have specifically consented to receiving electronic mail marketing or they are an existing customer, and you gave them a simple way to opt out of direct marketing.

ICO Guidance

The ICO plans to publish a range of updated guidance in light of the Data (Use and Access) Act 2025 and UK GDPR over the course of the year.

First up is updated guidance on international transfers, which should make it “quicker for businesses to understand and comply with the transfer rules under UK GDPR”. The updated guidance sets out key requirements, aims to reduce complexity and support the responsible transfer of personal information.

There is a ‘three step test’ to identify whether the transfer would be considered a restricted one, and the ICO have added new content to help provide clarity on areas they know that firms have questions.

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