A new taskforce will tackle poor handling of motor finance claims by some claims management companies (CMCs) and law firms, after the FCA, Solicitors Regulation Authority (SRA), Information Commissioner’s Office (ICO) and Advertising Standards Authority (ASA) agreed to join up their efforts. The announcement comes as the FCA prepares to set out its final compensation scheme for motor finance customers.The regulators will step up efforts to share intelligence and continue to take co-ordinated ...
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We are reminding regulated firms they need to undertake proper checks when dealing with unregulated lenders, safe custody providers, money brokers and financial leasing companies – also known as 'Annex 1' firms. There are around 1,200 of these firms registered with us for solely anti-money laundering purposes. Our powers are currently limited to looking at how these firms are meeting their anti-money laundering obligations and they are not subject to our wider rulebook. This regime is based o...
The FCA statement reminds regulated firms to perform robust due diligence on 'Annex 1' firms—unregulated lenders, safe custody providers, money brokers, and financial leasing companies registered solely for AML purposes—due to their limited oversight and heightened financial crime risks. This matters because Annex 1 firms (approx. 1,200) are not subject to FCA's full rulebook, conduct rules, or protections like the Financial Ombudsman Service, exposing regulated firms to contagion risks if they fail to manage interactions properly. Non-compliance could lead to regulatory scrutiny, enforcement, or reputational damage amid FCA's ongoing AML focus.
What Changed
No new rules or legislative changes are introduced; this is a supervisory reminder reinforcing existing obligations under the Money Laundering Regulations 2017 (MLRs). It emphasizes enhanced due diligence on Annex 1 firms, referencing the 2025 National Risk Assessment (NRA) for risk management. The FCA highlights proactive engagement, including a 2024 letter to CEOs and follow-up with 300 firms in late 2025, signaling intensified supervision without altering the registration-only regime under the Financial Services and Markets Act.
What You Need To Do
- Verify Annex 1 registration status directly from the firm and via independent checks (e
- Understand the Annex 1 firm's business model, products, and risks, aligning with MLRs and 2025 NRA
- Manage identified risks, such as AML deficiencies or consumer encouragement into limited company structures for unregulated lending
- Document due diligence to demonstrate compliance, integrating into broader financial crime frameworks (e
Key Dates
2024 - FCA letter to CEOs of Annex 1 firms raising AML concerns. - **Late 2025 - FCA follow-up engagement with 300 Annex 1 firms.**
Compliance Impact
Urgency: High – This amplifies existing AML due diligence requirements amid FCA's 2025-30 financial crime strategy, with evidence of supervisory action (2024 letter, 2025 follow-ups). Failure risks enforcement, as Annex 1 interactions could facilitate financial crime or consumer harm without FOS protections; firms should audit exposures immediately to align with BWRA/CRA expectations and avoid findings like those in FCA's risk assessment review.
BankPayment ProviderAll Firms
We have opened an enforcement investigation into Market Financial Solutions Limited (MFS). MFS is an Annex 1 business, which is solely registered with and supervised by us for its compliance with the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.Annex 1 registered firms are not authorised or subject to wider FCA regulation.MFS entered administration on 25 February 2026.
The FCA has opened an enforcement investigation into Market Financial Solutions Limited (MFS) following the firm's entry into administration on 25 February 2026, amid allegations of serious financial irregularities, fraud, and double-pledging of collateral. This investigation is significant because it represents regulatory scrutiny of an Annex 1 business—a firm with limited FCA oversight—whose collapse exposed structural weaknesses in private credit markets and raised questions about due diligence practices across the financial sector.
What Changed
The FCA's enforcement investigation does not introduce new regulatory requirements but rather represents the regulator's response to alleged breaches of existing obligations. The key regulatory framework under which MFS is being investigated is:
Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017: MFS's primary regulatory obligation as an Annex 1 registered firm.
What You Need To Do
- *For MFS and its Administrators
- Cooperate fully with the FCA enforcement investigation
- Preserve all documentation related to AML/CTF compliance, customer due diligence, and transaction monitoring
- Provide access to bank accounts, transaction records, and compliance files to investigators
- Respond to FCA information requests within specified timeframes
Key Dates
25 February 2026 - MFS entered administration
20 March 2026 - FCA enforcement investigation opened (current date context)
No specific deadline provided for investigation completion or enforcement action
Compliance Impact
Urgency: CRITICAL
BankAll Firms
We’ve reached a significant milestone in our joint work with the Financial Ombudsman Service and the Government to modernise the redress systemso that consumers get fair outcomes quicker and firms have greater clarity about how issues will be handled.We’re delivering change at speed by acting now within our current powers, with a focus on improving how the system works in practice. This includes a new registration stage for complaints, updated dismissal grounds and clearer guidance on the fai...
The FCA, in collaboration with the Financial Ombudsman Service (FOS) and the Government, has announced modernization of the UK's financial redress system to accelerate consumer compensation and provide firms with greater regulatory clarity. This initiative represents a fundamental shift in how complaints are registered, assessed, and resolved, with immediate implementation underway within existing FCA powers and broader legislative reforms planned.
What Changed
The redress system modernization introduces several structural and procedural reforms:
*Registration Stage for Complaints**
A new formal registration stage has been introduced to standardize how complaints enter the system, improving tracking and early identification of systemic issues across firms and markets.
*Updated Dismissal Grounds**
The FCA has revised the criteria for dismissing complaints, providing clearer standards that should reduce disputes about complaint admissibility and improve consistency in decision-making.
*Enhanced Fair and Reasonable Test Guidance**
Clearer guidance...
What You Need To Do
- *Immediate Operational Priorities (Pre-May 2026)
- *Governance and Accountability
- Appoint senior managers with explicit accountability for complaints handling and redress programmes
- Establish board-level oversight structures with regular reporting on complaints volumes, redress calculations, and regulatory compliance
- Document decision-making frameworks for complaint eligibility and dismissal grounds
Key Dates
31 May 2026 - Complaints pause lifts for DCA-related motor finance complaints; standard 8-week response deadline resumes DEADLINE
End of March 2026 - FCA expected to publish final rules and guidance for motor finance redress scheme, confirming scope, calculation methodologies, and timescales
Mid-2026 onwards - Motor finance compensation payments anticipated to commence
Before end of 2026 - Consumers expected to begin receiving compensation under motor finance scheme
Compliance Impact
Urgency: CRITICAL
BankFintechPayment Provider Lenders and brokers in thesecond charge mortgagemarket need toconsiderhow theyadvise customers, assess affordability and charge fees. An FCA review has found that weaknesses in some firms’ practices could put borrowers, particularly those consolidating debt, at increased risk of financial harm.Second charge mortgages are often used by customers with high existing levels of debt and low financial resilience. The FCA’s review found examples of good practice across the sector but also issues tha...
BankAll Firms
Rajinder Gill and accomplices have been sentenced for their involvement in a sale-and-rent-back scheme. Mr Gill has been sentenced to two and a half years in prison for running a sale-and-rent-back scheme without being authorised and illegally providing credit agreements and mortgages. As accomplices in the scheme, Amandeep Heer received a community order for 2 years with a condition of 250 hours of unpaid work, and Jetinder Sandhu has completed 100 hours' unpaid work over 12 months (as a con...
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We'd also streamline the scheme, so millions get compensation in 2026. We're considering over 1,000 responses to our proposals for a compensation scheme for motor finance customers who were treated unfairly.If we proceed with a scheme, we are likely to make several changes. If we do go ahead, we expect to publish final rules in late March. The timing of publication will be outside market hours and we'll confirm the date in advance. Final decisions on the scheme have not yet been made. But to ...
The FCA is implementing a **streamlined motor finance compensation scheme** to address unfair commission disclosure practices, with final rules expected in late March 2026 and scheme launch in early 2026. This represents a major regulatory intervention affecting approximately 14 million motor finance agreements with estimated total redress costs of £8.2 billion, requiring immediate operational preparation by all lenders and finance providers.
What Changed
The FCA's streamlined approach introduces several material modifications to the original compensation scheme proposal:
*Process Streamlining
Automatic opt-in for prior complainants: Customers who complained before scheme launch will no longer be asked to opt out. Instead, lenders must notify them of compensation eligibility within three months of the implementation period ending.
Immediate acceptance of offers: Consumers can accept redress offers immediately rather than waiting for final determinations.
Flexible communication channels**: Firms are no longer required to use recorded delivery;...
What You Need To Do
- *Immediate Priorities (Q1 2026)
- *Data Integrity Assessment
- *Redress Calculator Development
- Repricing loans based on proposed APR reductions
- Calculating compensatory interest at BoE base rate + 1%
Key Dates
31 May 2026 – Motor finance complaints handling pause lifts; firms must be ready to respond to complaints outside the scheme DEADLINE
Late March 2026 – FCA to publish final scheme rules (timing to be confirmed in advance, outside market hours)
Early 2026 – Scheme implementation begins (exact date dependent on final rules publication)
Three months from scheme launch – Standard implementation period for lenders to contact prior complainants and provide compensation notifications
Five months from scheme launch – Extended implementation period for older agreements
Compliance Impact
Urgency: CRITICAL
BankFintechAll Firms
Lenders could have access to more comprehensive information to support lending decisions, under new proposals by the FCA. The FCA is consulting on designating certain credit reference agencies (CRAs). If a lender shares credit information with one designated consumer CRA, it would be required to share it with them all.The changes aim to close gaps in consumers’ credit files and ensure these more accurately reflect people’s financial circumstances.Alison Walters, director of consumer finance a...
BankFintechAll Firms
Policy statement 5/26
PRA Policy Statement PS5/26 finalizes rules permitting UK credit unions to invest in Credit Union Service Organisations (CUSOs), expanding from the CP13/25 proposals to foster innovation, collaboration, and growth while managing prudential risks through safeguards like due diligence and investment caps. This matters as it enables credit unions—often smaller mutuals—to access shared services (e.g., HR, IT, compliance) via CUSOs, leveling the playing field against larger competitors and supporting the PRA's safety/soundness and competitiveness objectives.
What Changed
Investment permission and cap increase: Credit unions can now invest in CUSOs using own capital, with the cap raised from 5% to 7.5% of total capital across all CUSOs (clarifications added on practical application, e.g., aggregation).
Expanded CUSO scope: CUSOs can now serve other UK-regulated mutuals (with Part 4A permission) beyond just credit unions; partnerships with non-credit unions permitted as owners, subject to safeguards.
Supervisory expectations in SS2/23: New chapter requires due diligence, risk analysis, limited liability to investment amount, legal/operational separation,...
What You Need To Do
- Review and update policies
- Ensure structural safeguards
- Governance alignment
- Implementation planning
- Reporting/oversight
Key Dates
24 October 2025 - Consultation response deadline for CP13/25. DEADLINE
20 February 2026 - Publication date of PS5/26 (final policy).
~20 August 2026 - Implementation deadline for SS2/23 CUSO expectations (six months from PS5/26 publication). DEADLINE
Compliance Impact
Urgency: High – Credit unions eyeing CUSOs for growth (e.g., shared services) must act promptly within the six-month window to avoid supervisory breaches, as this expands opportunities but introduces new prudential risks (e.g., ownership misalignment, capital exposure). Non-compliance risks heightened PRA scrutiny, especially post-PS26/25 mutual sector review; benefits justify costs only for opt-in firms, but proactive preparation ensures safety/soundness.
BankFintechAll Firms
The FCA and Solicitors Regulation Authority (SRA) have today issued a joint warning to claims management companies (CMCs) and law firms involved in motor finance commission claims to make sure consumers don’t have multiple representatives for the same claim and are not charged excessive termination fees. The regulators are reminding CMCs and law firms that they are expected to have robust checks in place to confirm consumers have not already instructed another representative. The FCA has also...
BankFintechAll Firms
First-time buyers and the self-employed could get a step-up onto the housing ladder, under new plans from the FCA. Its priorities for reforms to the mortgage market also include helping homeowners unlock housing wealth for a more comfortable later life.The FCA will focus on 4 areas:First-time buyers & underserved consumers: Simplifying mortgage rules to allow more flexible products that reflect different working patterns and income levels at different stages of life.Later-life lending: Review...
BankFintech
Policy statement 26/25
The Prudential Regulation Authority (PRA) has issued PS26/25, finalizing the withdrawal of Supervisory Statement (SS) 20/15, which previously set prescriptive expectations for building societies' treasury and lending activities, effective immediately upon publication on 5 December 2025. This deregulatory move reduces administrative burdens, enhances proportionality across deposit takers, and promotes competition by aligning building societies more closely with banks, while relying on existing tools like the PRA Rulebook, SMCR, and routine supervision for risk management. It matters for compliance teams as it eliminates specific guidance often misinterpreted as binding requirements, freeing firms to tailor risk frameworks but requiring vigilance on broader prudential expectations.
What Changed
Full deletion of SS20/15: Removes all expectations on treasury and lending activities, including the "Treasury Approaches" framework, without replacement.
Consequential amendments: Updates SS31/15 (Internal Capital Adequacy Assessment Process and Supervisory Review and Evaluation Process) to excise references to SS20/15.
Alignment with broader policy: Addresses inconsistencies with PRA's approach for banks, improved sector risk management maturity, and proportionality for smaller firms; supports objectives of safety, soundness, competition, and growth.
No new rules imposed: PRA deems existing...
What You Need To Do
- Review and update policies
- Assess risk management
- Update governance documents
- Engage supervisors
- Monitor related reforms
Compliance Impact
Urgency: Medium – Effective immediately (5 December 2025), but deregulatory nature reduces burdens rather than imposing new obligations; critical for year-end 2025/early 2026 planning to avoid legacy SS20/15 misapplication. Matters as it shifts from prescriptive "hard limits" (often treated as rules) to principles-based supervision, enabling flexibility but heightening reliance on firm-specific risk assessments amid PRA's focus on competition and growth; non-compliance risks arise from over-reliance on withdrawn guidance or inadequate tailoring.
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The PRA has set the 2025 O-SII buffer rates for ring-fenced banks, large domestic firms, and large building societies
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Policy statement 22/25
The PRA's PS22/25 finalizes an increase in the retail deposits threshold for the leverage ratio requirement from £50 billion to £75 billion, introducing a three-year averaging mechanism for calculations, effective 1 January 2026. This adjustment reflects nominal UK GDP growth since 2016 to maintain the Financial Policy Committee's original risk appetite while smoothing cliff-edge effects for firms like building societies. It matters for major UK banks and similar firms as it alters capital planning and leverage ratio applicability, potentially reducing immediate compliance burdens for those nearing the old threshold.
What Changed
Retail deposits threshold raised from £50 billion to £75 billion, adjusted upward from the CP2/25 proposal of £70 billion to account for further GDP growth to Q2 2025 (rounded to nearest £5 billion).
Introduction of a three-year moving average for calculating retail deposits metric, replacing point-in-time values to mitigate volatility and aid capital planning, particularly for building societies.
Non-UK assets threshold remains unchanged at £10 billion.
Modifications by consent disapplying leverage ratio rules during review will cease on 30 June 2026.
These changes are implemented via...
What You Need To Do
- Review and update internal retail deposits calculations to incorporate three-year moving average methodology starting 1 January 2026
- Assess current and projected retail deposits against £75 billion threshold (and £10 billion non-UK assets) to determine leverage ratio applicability and adjust capital planning accordingly
- Prepare to meet 3
- For firms with modifications by consent
- Update governance, risk models, and board reporting to reflect changes; conduct gap analysis against PRA Rulebook appendices in PS22/25
Key Dates
5 March 2025 - PRA publishes Consultation Paper CP2/25 proposing £70 billion threshold.
5 June 2025 - Consultation response deadline. DEADLINE
12 November 2025 - PRA issues PS22/25 with final policy.
1 January 2026 - Final policy takes effect, applying new £75 billion threshold and three-year averaging.
30 June 2026 - Cessation of modifications by consent disapplying leverage ratio rules.
Compliance Impact
Urgency: High – With effectiveness just after today (1 January 2026), firms near £50-75 billion in retail deposits face immediate recalibration of leverage exposures and capital buffers to avoid breaches, amplified by the shift to averaging which requires historical data reconstruction. Non-compliance risks PRA enforcement, heightened scrutiny, or capital inadequacy findings, but the higher threshold and averaging provide planning relief versus the status quo.
BankPayment ProviderAll Firms
On 1 July, the PRA and the Bank of England held a roundtable meeting with representatives of non-systemic UK banks and building societies.
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