Insights ¦ Improving the Complaints Reporting process

Key Take Aways

1. The FCA is finalising a unified complaints reporting framework to streamline data collection across multiple sectors, replacing five existing returns with a single, consolidated system.
2. Firms will report complaints at the individual legal entity level, enhancing transparency and accuracy in regulatory oversight.
3. A permission-based reporting approach ensures firms only complete relevant sections of the new return, reducing administrative burden.
4. The new system introduces fixed 6-monthly reporting periods aligned to calendar years, replacing firm-specific accounting reference dates.
5. Firms with 500 or more complaints will have their data published individually, subject to threshold rules, improving market transparency.
6. There is a strong industry consensus supporting increased data granularity, which aids in identifying market trends and emerging harms.
7. The FCA will retain collection of contextualised complaints data for retail banking, insurance, payment services, and claims management companies to support benchmarking.
8. Customer vulnerability data collection is expanded to include complaints related to or involving characteristics of vulnerability, with detailed guidance provided.
9. Guidance for firms on complaint categorisation and reporting will be clarified and regularly reviewed, particularly for sectors with unique product features.
10. The implementation plan provides a 12-month window for firms to adapt systems, with the first reporting period expected for January to June 2027.
11. The FCA plans to conduct a comprehensive review at least five years post-implementation to assess data quality, consumer protection, and supervision efficacy.
12. The overall cost estimate for implementing the new complaints reporting system has increased to approximately £66.4 million, reflecting refined IT cost calculations for larger firms.

Key Statistics

• The FCA estimates 23,600 firms will be impacted by the new reporting regime.
• 94% of firms are small firms, with only 1% classified as large firms.
• The revised IT cost for large firms is estimated at £21,000 per firm, and £19,000 for medium firms.
• The aggregated one-off costs to all firms are projected at £66.4 million, rising from the previous estimate of £49.2 million.
• The FCA will publish data for firms with more than 500 complaints, with thresholds set uniformly at 500 complaints for individual publication.
• Firms are expected to report their complaints data twice annually, starting from January 2027.
• The first reporting period under the new return will cover complaints data from 1 January to 30 June 2027.
• Firms with fewer than 500 complaints will submit partial annual reports, with detailed reporting templates provided.
• The FCA’s strategic review will occur at least five years after full implementation.
• The expected internal costs for FCA system development and implementation are around £1.86 million.
• The total annualised direct cost to industry (EANDCB) is estimated at £6 million, up from £3.8 million previously.
• Changes in reporting and publication processes aim to enhance comparability and supervisory capacity while reducing reporting burden for smaller firms.

Key Discussion Points

• The consolidation of five existing complaints returns into a single, streamlined system aims to improve data quality and reduce duplication.
• Firms will be required to submit complaints at the legal entity level, promoting transparency and more targeted oversight.
• Permission-based reporting ensures firms only complete relevant sections, supporting proportionality and operational efficiency.
• The new fixed 6-monthly reporting periods align with calendar years, simplifying compliance and enabling timelier data analysis.
• Data publication will focus on larger firms (over 500 complaints), with threshold rules maintained for consistency and transparency.
• Stakeholders broadly support increased granularity in complaints data, which supports proactive supervisory intervention.
• Sector-specific retention of contextualised complaints data will continue for retail banking, insurance, payment services, and claims management, facilitating benchmarking.
• The expansion of vulnerability data collection aims to better identify and respond to customer harm, with detailed guidance provided to firms.
• The consultation results suggest a strong industry endorsement for the revised complaint categories and enhanced reporting clarity.
• The implementation timeline of 12 months is intended to provide firms sufficient lead time for internal systems and processes adjustments.
• A comprehensive review, every five years post-implementation, will evaluate the real-world impact and ongoing effectiveness of the new reporting regime.
• The revised cost estimates reflect realistic IT change costs for larger firms and acknowledge the overall proportionate burden of these reforms within the industry.