Feb 24, 2026

What Does the FCA Expect From Firms During Large-Scale Redress?

The Financial Conduct Authority (FCA) expects firms undertaking large-scale redress—such as the ongoing FCA motor finance review—to act promptly, fairly, and transparently, adhering strictly to the principle that the “polluter should pay”. The core FCA redress expectations require firms to stop foreseeable harm, put things right for affected customers, and establish robust, well-governed processes that ensure every decision is evidence-led and fully auditable. This approach is rooted in the broader obligations of the Consumer Duty.

TL;DR Summary

• Firms must establish robust governance and operational readiness, often through automation, to manage the scale of the FCA motor finance redress.
• FCA remediation requirements mandate a data-first approach, including the reconstruction of missing historical records to ensure fair customer outcomes.
• The FCA requires explainable redress decisions and adequate financial provisioning for all potential liabilities, aligning with Principle 4 (Financial Prudence).

What are the Foundational Principles Guiding FCA Redress Expectations?

The FCA’s requirements for large-scale compensation schemes are fundamentally driven by its Principles for Businesses (PRIN) and the Consumer Duty (2023).

• Principle 4 (Financial Prudence): Firms must have adequate financial and non-financial resources to meet all liabilities, including the full cost of compensation. This requires early and verifiable provisioning for potential redress.
• Consumer Duty: Firms must act in good faith, avoid causing foreseeable harm, and enable and support retail customers to pursue their financial objectives. This translates into a requirement for timely, clear, and fair compensation.
• The “Polluter Pays” Principle: The firm responsible for the original misconduct must bear the cost of putting things right, which includes the expense of the investigation, administration, and full compensation plus compensatory interest.

How Must Firms Prepare Operationally for Regulatory Redress?

The FCA mandates that firms establish a comprehensive and resilient operational structure capable of executing the regulatory redress guidelines at scale. This forms the FCA Remediation Operating Model.

• Establish Governance & Oversight: Appoint a suitable Senior Manager Function (SMF) to take overall responsibility for the scheme’s delivery, ensuring project boards and legal teams provide strategic challenge and risk assurance.
• Ensure Data Integrity: Firms must locate, cleanse, and validate all historical data, often dating back to April 2007. They must plan to address data gaps using external sources, fulfilling a key FCA remediation requirement.
• Build Automated Processes: Deploy technology for case identification, liability assessment, and calculation to ensure consistency and efficiency. The FCA explicitly expects automation to play a central role in large schemes.
• Manage Complaints Channels: Design a clear process map to delineate between existing complaints (which may be opt-out) and new scheme cases (which may be opt-in), ensuring compliance with the Dispute Resolution (DISP) rules.
• Secure Financial Resources: Assess the total financial impact of the scheme against the business model and update wind-down plans to ensure solvency if liabilities are material.

Why Does the FCA Require Evidence-Led Redress Decisions?

The FCA demands that every customer outcome be justifiable and transparent, which directly leads to the requirement for explainable redress decisions and evidence-led redress.

• Auditable Traceability: For every compensation amount calculated, firms must demonstrate the exact data source, the specific rule applied, and any assumption made (especially where data is missing).
• Rebuttal of Presumptions: The FCA establishes a presumption that inadequate disclosure led to an unfair relationship and customer loss. To rebut this, firms must provide firm evidence of adequate disclosure or that the customer could not have obtained a better deal.
• Consistency: Reliance on formulaic, evidence-led redress ensures that customers with identical circumstances receive identical outcomes, satisfying the fairness requirements of the Consumer Duty.

What are the Key Regulatory Hurdles for Evidence-Led Redress?

The biggest hurdle in meeting FCA redress expectations is overcoming deficiencies in historical data, a problem compounded by the scope of the FCA motor finance review (agreements from 2007).

The FCA has made it clear that a lack of historical data will not be accepted as an excuse for non-compliance; firms must actively mitigate these gaps.

Summary

The FCA redress expectations for large-scale programmes require firms to go beyond basic complaint handling to implement a full-scale, governed, and data-intensive remediation exercise. The emphasis is on proactive action, financial prudence, and delivering evidence-led redress that is transparent and consistent for every customer, ensuring compliance with the fundamental Principles and the Consumer Duty.

Author:

Shaziya Fathima
Head of Brand and Events