UK Regulators Publish Revised Complaints Scheme

The U.K. Financial Conduct Authority, Prudential Regulation Authority and Bank of England have jointly published their revised Complaints Scheme, which governs how complaints against the U.K. regulators should be made and handled. The changes include:

• The introduction of specific discretionary compensation bands for non-financial loss arising from the regulators’ actions or inactions. The bands range from £100 for a relatively low level of stress or inconvenience, up to over £2,500 in exceptional circumstances, for example, where the consequences of the regulators’ failings are particularly severe.
• The introduction of a new test as to when regulators will make compensation payments for financial loss — namely, where the regulators have made a clear and significant error and they are the "sole or primary cause" of the financial loss. The "sole or primary cause" test is controversial. The FCA first announced it via a Remedies Statement which had not been subject to public consultation. This action formed the basis of a series of complaints which resulted in a report by the Financial Regulators Complaints Commissioner that was critical of the test and the FCA's reliance on it. The regulators have nonetheless continued with their proposal to formally introduce the "sole or primary cause" test into the Complaints Scheme, which will significantly limit the circumstances in which they are liable to pay compensation. The regulators have, however, abandoned their proposal to cap compensation payments for financial loss at £10,000, following criticism of the move at consultation stage. There will be no upper limit on compensation, although the Complaints Scheme states that compensatory payments are unlikely to reflect the full amount of complainants' losses.
• Simplification of the Scheme, for example, using plain language and incorporating diagrams to illustrate the complaints process.

In addition, changes reflect that HM Treasury is responsible for the appointment of the Complaints Commissioner, bringing the Scheme in line with the Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for U.K. Financial Services"). The new Complaints Scheme will take effect from November 1, 2023.

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