CP 26/9 Modernising the Redress System Member Briefing + Finalised Guidance (FG26/2) 

CP 26/9 Modernising the Redress System Member Briefing + Finalised Guidance (FG26/2) 

The Financial Ombudsman Service (FOS) and Financial Conduct Authority (FCA) have published their joint consultation paper on Modernising the Redress System. The consultation sits as part of wider work to modernise the redress system that was set out in the Chancellor’s Mansion House Speech in 2024. It also follows the FCA and FOS consultation in July 2025, ‘CP25/22 Modernising the Redress System’. The consultation closes on 11 May 2026.  

The consultation covers three key areas,  

• Including a new registration stage, before there is a full investigation  

• Updated dismissal grounds 

• Amendments to the fair and reasonable test  

Key Themes and Proposals: 

Registration Stage: 

The FOS is proposing a two-stage process, incorporating a pre-registration stage and the full registration stage. The pre-registration stage ensures that the complaint readiness is checked, and moves to the registration stage, which is where the investigation of the complaint begins. 

As a result of these proposals, poorly evidenced complaints will be dismissed earlier, but with safeguards for more vulnerable members to still be supported and accessibility safeguards to be in place.  

Dismissal Grounds: 

The FOS is also proposing to expand and modernise the dismissal grounds. This follows the replacement of the 2015 ADR Regulations in Spring 2026, removing the FOS from the scope of this legislation.  

The FOS is consulting on the following amendments to the grounds for dismissal of a complaint: 

• Frivolous or vexatious complaints  

• Complainant acting abusively/unreasonably  

• Cases better suited to courts or other schemes  

• Complaints with no reasonable prospect of success  

• Complaints where a fair offer is already open  

• Complex scenarios such as will/trust discretion or joint complainants 

Fair and Reasonable Test Amendments: 

The FOS proposes to remove the reference to ‘good industry practice’ in DISP 3.6.4R. Concerns have arisen that this term can appear subjective and create uncertainty. 

The FOS propose to clarify that only the standards applicable at the time of the act or omission complained of should be taken into account in fair and reasonable tests. 

This will reduce the retrospective interpretation of standards and aims to provide more certainty on how the FOS assess decisions.  

The consultation asks for views on: 

• Whether FOS should create a new early stage to check if a complaint is ready before investigation. 

• Whether this would help complainants understand what information is required. 

• What safeguards are needed so vulnerable consumers are not disadvantaged? 

• Whether FOS should be able to pause cases or send them back to firms during this stage. 

• Whether different or lower-case fees should apply for cases that stop at registration. 

• Whether FOS should modernise the list of reasons it can dismiss complaints without full investigation 

• Removal of the requirement to consider “good industry practice”. 

• Making clearer that only the rules and standards in place at the time of the event should be used to assess fairness. 

Next Steps: 

The Consultation paper closes on the 11 May 2026 

We welcome any feedback and thoughts, as this will help shape a more comprehensive and representative response for the credit union sector. Please reach out to the Advocacy at  Advocacy@abcul.org. 

Policy Statement Briefing – FCA Finalised Guidance on CP25/22 

The FCA have also published their finalised rules in CP25/22, which will be implemented in phases from March-June 2026. 

Finalised Policy Proposals: 

New SUP 15 Reporting Guidance:  

The FCA has finalised guidance on when firms, including credit unions, must report emerging redress issues. This will apply from 1 June 2026. 

Introducing guidance in SUP 15 : The FCA has set out which issues require notification to the FCA, alongside Non-Handbook Guidance which includes good and poor practice examples. The SUP guidance includes issues that may affect more than 40% of a product or service; May lead to substantial financial loss to members (more than £10k each); May lead to a high redress bill (more than £10m or 50% of annual revenue); may cause a significant spike in complaints, or may affect firm solvency or capital adequacy 

Good and Poor Practice Finalised Guidance in Identifying Harm 

The proposal to publish non-handbook guidance and examples of good and poor practice was put forward in the FOS/FCA’s CP25/22 in July 2025. As a result, they have published a finalised guidance document on their website. This can be accessed here.  

Predictability in Redress Outcomes: Mass Redress Events (MREs) 

The Definition and criteria of a Mass Redress Event have been finalised by the FCA. The new criteria are listed below: 

• Affects a high number of consumers or firms  

• Impacts vulnerable consumers significantly  

• Leads to large redress liabilities  

• Results in some firms becoming unable to meet redress  

• Causes high complaint volumes to firms and FOS  

• Reflects systemic/recurring failings  

• Involves complex or uncertain points of law 

DISP Changes relevant for Credit Unions  

Cooperation with the FOS 

This new guidance is effective from 17 March 2026 and clarifies that firms need to take ‘reasonable steps’ to cooperate with the FOS. This aims to reduce delays and confusion around cooperating with the FOS. The FOS will require firms to proactively share new information relevant to the complaint case, comply with the FOS’s direction and promptly provide supporting evidence and information.  

Complaint Acknowledgement – amendments to DISP 1.6.1R  

The DISP change takes effect from 1 June 2026.  

Firms will need to tell complainants the date they will receive a final response within the statutory timeframe, in this case, 8 weeks. This can take the form of a Final Response Letter or a written explanation if there is a delay.  

FSCS Operational Efficiency  

These FCA revisions to FSCS rules take effect from 17 March 2026. 

Simplified and Clarified Eligibility Rules (COMP 4 & 12A) 

• Eligible claimant rules have been streamlined to remove duplication and outdated categories. Credit union directors remain eligible claimants.  

Confirming a firm in default (COMP 6.3.4R) 

• FSCS can declare a firm in default if FSS cannot contact the firm, even if reasonable steps have been taken, if there is failure to cooperate from the firm or directors and if personal circumstances prevent the management of the firm from engaging with the FSCS.  

Flexibility where compensation is paid (COMP 11.2) 

• FSCS can pay compensation to beneficiaries, estates, and third parties  

• Where it is in the claimant’s best interests as considered by the FSCS.  

Compensation can be paid without a full investigation in certain cases (COMP 12.2.10R) 

• FSCS can settle claims without full investigation if the cost of said full investigation is disproportionate, if it is in the interest of the levy payers and for the preservation of public confidence in the FSCS. 

Steps credit unions will need to take: 

• Update complaint acknowledgement letters 

• Continue to be proactive in monitoring issues which may lead to complaints 

• From 1 June 2026: prepare to notify the FCA earlier when an issue could cause significant harm. 

• Continue proactive cooperation with FOS where required