Complaints Handling: FCA Expectations and New Reporting Requirements

Introduction - Complaints Handling: FCA Expectations and New Reporting Requirements

Complaints are regulatory currency. How you handle them, learn from them, and report them tells the FCA everything about your culture, governance, and commitment to treating customers fairly. Poor complaints handling appears consistently in enforcement actions, Consumer Duty breaches, and business restrictions.

For payment institutions, EMIs, and banks, complaints handling became significantly more demanding. Policy Statement PS 25/19 (December 2024) introduces substantial changes to complaints reporting effective January 2027. New consolidated reporting, permission-based requirements, individual legal entity reporting, vulnerability reporting, and publication of firm-level data for firms with 500+ complaints fundamentally change regulatory visibility.

Why Complaints Matter

The FCA's December 2024 thematic review of complaints handling across 40 firms revealed widespread failings. Root cause analysis wasn't happening. Complaints data wasn't informing business decisions. Governance was weak. Vulnerable customers weren't receiving appropriate support. These aren't minor compliance gaps. They're fundamental failures in treating customers fairly.

Under Consumer Duty, firms must deliver good outcomes for retail customers. When complaints arise, they signal potential Duty breaches. The FCA expects you to identify root causes, take action to prevent recurrence, and demonstrate continuous improvement. Firms that don't face enforcement action.

DISP Requirements

The FCA's Dispute Resolution sourcebook sets baseline requirements. You must have clear procedures for handling complaints fairly and consistently. Complaints must be acknowledged promptly. You must investigate thoroughly and respond within time limits. When you're wrong, you must put things right and pay appropriate redress. Customers must be informed about the Financial Ombudsman Service.

These aren't high bars. They're minimum standards. Yet the FCA's thematic review found many firms failing to meet them.

What the December 2024 Thematic Review Found

Across 40 firms, the FCA identified consistent weaknesses. Root cause analysis was superficial or non-existent. Firms identified immediate causes but failed to identify underlying systemic issues. Complaints data wasn't being used to drive improvements. Boards weren't receiving meaningful management information on complaints trends, root causes, or actions taken. Governance and oversight were inadequate. Senior management wasn't engaged with complaints as an indicator of customer outcomes.

Vulnerable customer support was particularly poor. Firms weren't identifying vulnerability indicators in complaints. When they did identify vulnerable customers, they weren't providing appropriate additional support. Staff training on vulnerability was inadequate.

New Reporting Requirements from January 2027

PS 25/19 introduces substantial changes to complaints reporting effective January 2027. The new consolidated complaints return replaces multiple existing returns with a single submission covering all regulated activities. Permission-based reporting means you report complaints specific to each permission you hold. Individual legal entity reporting applies where you operate multiple entities under group structures.

Vulnerability reporting is entirely new. You must report complaints from vulnerable customers separately, enabling the FCA to assess whether vulnerable customers experience disproportionate issues or receive inadequate support.

For firms receiving 500 or more complaints in a six-month period, the FCA will publish firm-level complaints data. This makes your complaints performance publicly visible, affecting reputation and competitive position.

The enhanced reporting provides the FCA with granular visibility into complaints across the sector, enabling targeted supervision and enforcement. If your complaints data shows patterns of poor outcomes, expect regulatory attention.

Consumer Duty Integration

Consumer Duty requires you to deliver good outcomes across four areas: products and services, price and value, consumer understanding, and consumer support. Complaints signal where you're failing to deliver good outcomes.

The FCA expects you to analyse complaints systematically to identify where products don't meet customer needs, pricing isn't fair, communications aren't clear, or support is inadequate. You must take action to address root causes and prevent recurrence. Your board must receive regular reporting on complaints as an indicator of Consumer Duty compliance.

Firms that treat complaints handling as a separate compliance function disconnected from Consumer Duty are getting this wrong. Complaints are your primary feedback mechanism on whether you're delivering good outcomes.

Common Failures

Recent FCA findings and enforcement actions reveal recurring problems. Inadequate root cause analysis identifies immediate causes but fails to identify systemic issues. Complaints data isn't used to drive business improvements. Governance and oversight are weak with insufficient board engagement. Vulnerable customer identification and support are inadequate. Staff training on complaints handling and vulnerability is insufficient. Complaints handling procedures aren't followed consistently.

When the FCA identifies these failures, consequences follow. Enhanced supervision increases regulatory burden. Skilled person reviews cost hundreds of thousands. Enforcement action damages reputation. Business restrictions impact revenue. In severe cases, the FCA restricts licences or imposes significant financial penalties.

How Buckingham Capital Consulting Helps

Since 2013, we've specialised in helping payment institutions, EMIs, and banks build complaints handling frameworks that satisfy regulators whilst delivering good customer outcomes.

We start with comprehensive gap analysis, assessing your current complaints handling against DISP requirements, Consumer Duty expectations, and FCA thematic review findings. You receive specific identification of weaknesses, prioritised remediation actions based on regulatory urgency, and a clear roadmap with timelines and accountability.

For complaints handling procedures, we help you design or enhance processes covering initial complaint receipt and acknowledgement, investigation and decision-making, redress calculation and payment, response timing and quality, and Financial Ombudsman Service signposting. Your procedures must be clear, consistently applied, and deliver fair outcomes.

Root cause analysis is where most firms struggle. We help you build systematic approaches that identify immediate causes, underlying systemic issues, contributing factors across products, processes, systems, and people, and patterns across multiple complaints. Effective root cause analysis drives genuine improvements rather than treating complaints as isolated incidents.

Governance and oversight determine whether complaints drive change. We help you establish board reporting on complaints volumes and trends, root cause analysis and remediation actions, vulnerable customer complaints analysis, and Consumer Duty implications. Your board should engage with complaints as strategic business intelligence, not compliance data.

Vulnerable customer identification and support require specific capability. We help you implement identification processes during complaints handling, additional support tailored to vulnerability types, staff training on recognising and responding to vulnerability, and monitoring to ensure vulnerable customers receive appropriate outcomes.

The new reporting requirements from January 2027 require systems and processes. We help you implement consolidated complaints return preparation, permission-based reporting across your activities, individual legal entity reporting where applicable, vulnerability reporting capturing required data, and quality assurance ensuring data accuracy and completeness.

For firms approaching or exceeding the 500 complaints threshold triggering publication, we help you understand what will be published, assess reputational implications, develop communication strategies for stakeholders, and implement improvements reducing complaints volumes.

Consumer Duty integration means connecting complaints handling to outcome delivery. We help you analyse complaints data to identify Consumer Duty failings, implement remediation actions addressing root causes, update products, pricing, communications, or support based on complaints insights, and demonstrate to the FCA that complaints drive continuous improvement.

When the FCA raises concerns about complaints handling, your response determines outcomes. We help you prepare responses to FCA correspondence demonstrating understanding and credible remediation, prepare for supervisory meetings addressing regulator concerns effectively, and provide ongoing liaison managing regulatory expectations throughout remediation programmes.

We provide staff training on complaints handling covering DISP requirements and firm procedures, root cause analysis techniques, vulnerability identification and appropriate responses, Consumer Duty integration, and record-keeping satisfying regulatory expectations.

If you're uncertain whether your complaints handling meets FCA expectations, we conduct independent reviews assessing procedures against regulatory requirements, evaluating root cause analysis quality and effectiveness, reviewing governance and management information, assessing vulnerable customer support, and testing staff understanding and compliance. Our reports provide clear findings, root cause analysis, and prioritised recommendations.

Why Complaints Handling Is Critical

The FCA's focus on complaints handling intensifies as Consumer Duty embeds. The January 2027 reporting changes increase regulatory visibility dramatically. For firms with 500+ complaints, public disclosure adds reputational risk.

Poor complaints handling signals poor customer outcomes. The regulatory consequences include enhanced supervision, skilled person reviews, enforcement action, business restrictions, and in severe cases, licence restrictions or significant financial penalties.

Effective complaints handling satisfies regulators, delivers good customer outcomes, and provides business intelligence driving improvements. The investment required is modest compared to regulatory and reputational costs of getting it wrong.

Contact Buckingham Capital Consulting to discuss your complaints handling framework. With over a decade of specialist expertise helping payment institutions, EMIs, and banks deliver effective complaints processes, we know what the FCA expects and how to implement solutions that work.

Email us at info@buckinghamcapitalconsulting.co.uk or call 0207 866 2512