Controversial plans to “name and shame” firms
Last week, on 12 March 2025, the FCA announced its decision, having written to the Treasury Select Committee the day before, to abandon its controversial plans to routinely "name and shame" firms under investigation – at least insofar as they relate to regulated firms. This decision came after significant backlash from industry stakeholders and politicians. BCLP was amongst the stakeholders who raised strong objections to the FCA’s original proposals in CP24/2 and again to the reformulated proposals in CP24/2 Part 2.
The FCA will not progress its plan to introduce a new public interest test in relation to investigations into regulated firms. But that is not the end of this story. The FCA is going to consult by the end of June 2025 on:
- Reactively confirming investigations already in the public domain
- Public notifications focusing on the potentially unlawful activities of unregulated firms and regulated firms operating outside the regulatory perimeter
- Publishing greater detail of issues under investigation on an anonymous basis.
As you would expect, we will be dissecting the FCA’s next enforcement consultation with the same vigour as we have the previous ones, so watch this space.
DEI mandatory data reporting proposals
Also on 12 March 2025, the FCA and PRA announced their joint decision not to proceed with plans for mandatory data reporting on diversity, equity, and inclusion (DEI). This decision follows extensive consultation and feedback from industry stakeholders, which highlighted concerns about potential regulatory duplication and the additional costs such rules might impose on firms. The regulators acknowledged the importance of DEI but decided to align their approach with existing initiatives to avoid unnecessary burdens on businesses. Consequently, they will not publish new DEI rules at this time, although they will continue to support DEI through existing initiatives and align their approach with planned legislation.
What are the updates to the “to do” list?
Tackling non-financial misconduct
The FCA’s statement on 12 March 2025 confirmed that they are continuing to prioritise their work to tackle non-financial misconduct, which is seen as crucial for improving market and consumer outcomes. The FCA aims to ensure its approach is proportionate and aligned with upcoming legislation, with next steps to be outlined by the end of June 2025.
This is rather later than expected (and hoped). In our last article on this subject, we indicated that the rules were due any day. The FCA also does not promise that we will have the full set of final rules in June, but hopefully we will have further clarity on where we are heading and what remains on the FCA’s “to do” list.
Reform of the FOS
The Treasury’s Action Plan builds on announcements made by Rachel Reeves in her November 2024 Mansion House speech, particularly concerning the FOS. The Economic Secretary to the Treasury has been tasked with reviewing the FOS before the summer, focusing on:
- The framework in which the FOS operates, which has sometimes led it to act as a “quasi-regulator”
- Whether the FOS is applying contemporary standards to past actions
- The practices surrounding compensation that have developed over time.
Change is no doubt coming. The government has indicated its readiness to legislate to ensure that the UK has “a dispute resolution system in the UK which is fit for a modern economy”.
The groundwork for this is already underway. On 15 November 2024, the FCA and FOS jointly published a call for input seeking views on how the current regulatory redress framework can be improved, particularly in the context of mass redress events. We submitted a paper in response, our primary proposal involving amended use of the existing Wider Implications Framework, as summarised here.
On 7 February 2025, the FOS published a policy statement confirming that from 1 April 2025 it will charge claims management companies, and other professional representatives acting on behalf of complainants, £250 for referring over ten cases a year. Significant changes, but it seems that more wholesale reform of the FOS is afoot under the direction of the Treasury. For our financial services clients, this cannot come soon enough.
Consultation on a redress scheme for motor finance customers
There is a significant potential redress scheme in the offing in respect of the past use of motor finance commission arrangements.
Unsurprisingly, on 4 March 2025, the FOS released statistics on their complaint volumes showing they are now receiving 40% more cases compared to the same time last year, with motor finance products being the most complained.
Last week, on 11 March 2025, the FCA confirmed that “if, taking into account the Supreme Court's decision, we conclude motor finance customers have lost out from widespread failings by firms, then it's likely we will consult on an industry-wide redress scheme”. The timing of this is dependent on the Supreme Court’s judgment, with the FCA’s latest statement confirming that they will no longer make an announcement in May.
The Supreme Court will hear the appeal against the Court of Appeal’s judgment on 1 to 3 April and the FCA has been granted permission to intervene. We can expect judgment from the Supreme Court before the summer and the FCA’s decision within 6 weeks of the judgment.
Officially adopt the PSR
On 11 March 2025, the Government announced that the Payment Systems Regulator (PSR) was being abolished as part of broader efforts to simplify the regulatory environment and reduce the burden on businesses. The work of the PSR will be consolidated within the FCA – the PSR is already housed in Stratford alongside the FCA.
Whilst the PSR will formally continue to operate under its own statutory powers pending legislative change, the Treasury’s Action Plan confirms that we can expect a consultation on this “over the course of the summer”. Meanwhile, the FCA wasted no time confirming in a statement the same day that it “will drive forward with change”, so on the ground we can expect to see the FCA moving into the PSR’s domain.
Amongst the FCA’s “pledges” in Annex A of the Action Plan is the commitment to continue work to review the contactless payment limits, including removing the £100 limit on individual payments and to extend pre-application support to all wholesale payments and cryptoasset firms. More significantly, however, is the broader commitment that the FCA will “take on responsibility for ensuring the payments sector promotes innovation and competition”.
SM&CR reform
Notable due to the absence of news, is the overhaul of the senior managers and certification regime (SM&CR). In the Mansion House speech in November 2024, the Chancellor indicated that the Treasury, FCA, and PRA will soon make public the results of their review into the SM&CR, including a commitment to consult on removing the current Certification Regime. The FCA letter and PRA letter in mid-January 2025 confirmed this commitment to “reduce bureaucracy and increase flexibility”.
The Treasury’s Action Plan is silent on this topic, but the message is clear. Action 1 is to “tackle complexity and the burden of regulation” and refers to “delivering an ambitious regulation reform programme”, of which SM&CR reform is no doubt part.
Other efforts to reduce regulatory burden and support growth
The task set to the financial services regulators is clear: deliver on their secondary competitiveness and growth objective. The FCA and PRA letters on growth in January set-out their plans.
From the PRA, there are commitments to simplify the prudential regime for small banks and regulatory data reporting requirements, and to progress plans to revise remuneration requirements to enhance competitiveness.
The FCA’s plans include reducing regulatory burdens and streamlining the handbook – on which we’re still awaiting the FCA’s feedback following the July 2024 Call for Input for the Review of FCA retail conduct requirements following introduction of the Consumer Duty. This must be on the FCA’s “to do” list before the summer, and it seems likely that this will include proposed changes to their rules and guidance and a formal consultation period.
The FCA’s plans also include significant steps to accelerate plans for digital assets and innovation and to improve the authorisations process for firms to start up and grow. These are picked-up in the FCA’s pledges in Annex A of the Action Plan, which include:
- Providing a dedicated case officer to every firm within its regulatory sandbox
- Providing 50% more dedicated supervisors to early and high growth firms, to help them navigate the regulatory system and support their growth
- Indicating more often that it is “minded to approve” start-ups, to help them secure funding.
The Treasury will also streamline the FCA’s and PRA’s “have regards”. Section 1JA of FSMA (for the FCA) and Section 30B of the Bank of England Act 1998 (for the PRA) allow the Treasury to make recommendations to the regulators about aspects of the Government’s economic policy to which the regulators should have regard. The Treasury’s review will rationalise this list, to allow the regulators to focus on priority efforts.
