Financial services providers in the UK are facing renewed regulatory scrutiny, driven by a surge in customer complaints and the potential for large-scale redress schemes.
The Financial Ombudsman Service (FOS) reported a record-breaking number of complaints related to motor finance in Q4 2024, with a 33% increase from the previous quarter. Many of these complaints concern discretionary commission arrangements (DCAs), a now-banned practice that allowed brokers to inflate interest rates for personal gain.
The Financial Conduct Authority (FCA) is currently reviewing the scale of the issue and considering the implementation of an industry-wide redress scheme. If adopted, such a scheme could trigger compensation payouts on a scale comparable to the Payment Protection Insurance (PPI) scandal. Analysts estimate the cost could reach as high as £44 billion. The Supreme Court’s recent hearing on the legality of historic DCA practices will play a critical role in shaping next steps.
From resolution to reputation: the new role of complaints management
In this evolving context, complaints handling can no longer be viewed as a back-office function or a regulatory afterthought. It is emerging as a strategic capability that can protect reputation, demonstrate regulatory compliance, and even rebuild customer trust. As the FCA has made clear, any future redress scheme will not rely on customers raising complaints; instead, lenders will be expected to proactively identify and compensate affected individuals.
This shift represents a fundamental rethinking of the customer relationship. It places the onus on institutions to use their data, systems, and operational agility not just to respond, but to pre-empt and resolve. Done right, this creates an opportunity to differentiate through accountability and transparency.
Building a future-ready complaints infrastructure
To prepare for this future, firms must reengineer their complaints management frameworks around three core principles: data intelligence, operational scalability, and customer-centricity.
First, robust data governance is essential. Institutions must be able to analyse historical loan, commission, and complaints data to assess potential customer harm. This requires breaking down data silos and investing in systems that offer a single view of the customer.
Second, scalability is non-negotiable. If a redress scheme is enacted, the volume of cases could spike dramatically. Institutions will need agile operating models that can scale rapidly, combining human expertise with automation and AI to manage demand while ensuring compliance and quality.
Third, customer-centricity must be embedded at every stage. Whether engaging with customers through proactive outreach or resolving complex queries, the experience must be transparent and efficient. Institutions that succeed here will not only meet regulatory expectations but also earn long-term customer loyalty.
The strategic value of operational preparedness
Many firms are already investing in intelligent automation and AI to transform how they manage customer complaints. Businesses report that implementing AI-driven solutions in complaint handling, they have reduced average call handling time by 80%. At the same time, true preparedness can be achieved through the combination of technology and skilled human oversight. It requires trained operational teams who can manage exceptions, interpret data in context, and ensure that each customer is treated fairly.
Equally important is readiness at the leadership level. Executive teams must view complaints not as a liability but as a barometer of organisational health. A rising complaints trend may indicate deeper issues in product design, service delivery, or governance.
Strengthen your complaints strategy before it’s too late
While the final outcome of the Supreme Court case and the FCA review is yet to be determined, the direction of travel is clear. Regulatory expectations are increasing, and the bar for fair customer treatment is rising. Financial institutions that act now to strengthen their complaints management capabilities will be better positioned to navigate whatever comes next.
Forward-thinking institutions are already asking the right questions: Are we ready to manage complaints at scale? Can we identify affected customers quickly and accurately? Do we have the right blend of technology, people, and processes to deliver fair outcomes?
Now is the time to move from reactive to proactive. Those who lead on complaints today will be the ones who earn trust tomorrow.
Take the lead on complaints—before they lead to risk. Get in touch with us today to build a proactive complaints management strategy that protects your business, strengthens customer trust, and helps you meet evolving regulatory demands:
