The UK's Financial Conduct Authority (FCA) rolled out a major revamp of how financial firms report customer complaints, replacing five separate filing systems with a single consolidated return that aims to improve oversight of traditional financial services firms and also retail trading platforms.The UK Watchdog Doubles Reporting Burden Starting 2027The changes may hit licensed entities particularly hard, including FX and CFD brokers, requiring them to file complaints data every six months instead of annually and breaking down issues into more detailed categories. The regulator wants firms to start collecting data under the new system from Jan. 1, 2027, with the first submissions due by July 1, 2027."These improvements are a significant step forward in ensuring transparency and consistency across the sector," said Sarah Pritchard, Deputy Chief Executive of the FCA. "By streamlining returns and introducing clearer guidance, we're making it easier for firms to provide high-quality complaints data while strengthening our ability to protect consumers, particularly those who are most vulnerable."The FCA estimates the overhaul will cost the industry around £6 million annually, up from an initial £3.8 million projection. Individual firms face one-time implementation costs for IT system upgrades, staff training, and process redesigns.For retail brokers, this shift is generally viewed as negative, but the FCA tends to give with one hand and take with the other. At the end of November, FinanceMagnates.com reported that the regulator had updated reporting requirements for more than seven billion trades, allowing brokers to reduce their operating costs.Granular Product Categories Replace Catch-All BucketThe watchdog expanded product classifications with new standalone categories. The changes aim to reduce reliance on the catch-all “Other” category, which had grown to account for 7% of all complaints.The categories include a wide range of instruments, among them FX, CFDs, spread betting, and derivatives.In November, the FCA had issued a notice to CFD providers after a review showed that some firms were falling short of the standards expected under the Consumer Duty. The duty, introduced in July 2023, sets higher expectations for consumer protection across the financial sector.Firms must also map complaints against Consumer Duty outcomes covering price, product performance, consumer understanding, and support. For trading platforms, that means categorizing issues like execution failures, pricing disputes over spreads and commissions, platform outages, and inadequate risk disclosures.The FCA claims, it received strong support for scrapping group-level reporting. Instead, each UK entity must file separately, even if they're part of the same corporate family. That change drew some pushback over potential duplicate counting when multiple group companies handle different parts of a single customer complaint, but the regulator says it needs entity-level visibility to spot problems faster.Tracking Complaints from Vulnerable CustomersA new requirement forces firms to report two separate data points on vulnerable customers. The first captures all complaints where the customer disclosed or was identified as vulnerable, regardless of whether that vulnerability relates to the actual complaint. The second tracks cases where the firm failed to properly consider the customer's vulnerable status.The FCA cited examples including customers with gambling addictions (relevant for high-risk CFD traders), those in financial hardship, or people with cognitive impairments. Firms can use disclosed vulnerabilities or system-generated indicators to flag these cases. The regulator won't publish this data but will use it for supervisory reviews.That provision worried some respondents during the consultation phase. They raised concerns about inconsistent recording practices, data protection compliance, and the resources needed to identify vulnerability across different customer interactions. The FCA responded that firms only need to report legally held information and shouldn't conflict with existing privacy rules.Fixed Calendar Deadlines Replace Firm-Specific DatesAll firms now report on a calendar-year basis with data due for periods ending June 30 and Dec. 31. That replaces the old system tied to each company's accounting reference date, which created staggered deadlines throughout the year.The FCA says it needs more frequent data to identify emerging consumer harm and market trends faster.Companies with accounting dates that don't align with the new calendar system will file a short-period return covering the gap between their last ARD-based submission and Dec. 31, 2026. After that, everyone moves to the standardized schedule.Firm-level data gets published only when a company logs 500 or more complaints in a six-month period. That threshold applies across all sectors, despite some consultation feedback suggesting different levels for different industries (50-100 for funeral plans, 250 for consumer credit, 500 for banks and insurers).Separate AI Initiative Launched Same DayThe FCA also announced Wednesday that eight firms including NatWest, Monzo, Santander, and Scottish Widows joined the first cohort of its AI Live Testing initiative. The program helps companies deploy artificial intelligence in live UK financial markets with regulatory oversight.Participating firms work with the FCA's technical partner Advai to develop evaluation frameworks and risk management protocols for AI applications. Use cases focus on retail financial services including debt resolution, financial advice, customer engagement, complaints handling, and spending guidance.Applications for a second AI testing cohort open in January 2026, with participants starting in April. The regulator says it's avoiding new AI-specific regulations and instead applying existing rules to the technology. This article was written by Damian Chmiel at www.financemagnates.com.

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