Preparing for CP25/27: What lenders must do now

GlobalData

Thu, November 13, 2025 astatine 10:56 AM CST 4 min read

The Financial Conduct Authority’s Consultation Paper CP25/27 proposes an industry-wide redress strategy for UK centrifugal concern customers who whitethorn person been unfairly charged owed to inadequate disclosure of committee arrangements betwixt lenders and brokers.

Covering agreements from 6 April 2007 to 1 November 2024, the strategy targets practices specified arsenic Discretionary Commission Arrangements (DCAs) and precocious oregon exclusive commissions that whitethorn person breached FCA principles.

It is expected that the compensation strategy volition person the pursuing accounting implications for lenders:

As a effect of the Supreme Court rulings and the Financial Conduct Authority (FCA’s) consultation insubstantial connected DCAs, determination is greater clarity for affected lenders connected their position. The FCA’s insubstantial lays outs a suggested redress methodology.

Under UK GAAP FRS 102 Section, provisions should beryllium accounted for if the pursuing conditions are met:

1. The entity has an work astatine the reporting day arsenic a effect of a past lawsuit – Given that the redress is arsenic a effect of agreements issued successful past betwixt 2007 and 2024 this information is satisfied.

2. It is probable (ie much apt than not) that the entity volition beryllium required to transportation economical payment successful settlement; Given that inadequate disclosure of committee arrangements represents a regulatory breach that has been confirmed by the courts for which the remedy is redress this information is satisfied.

3. The magnitude of the work tin beryllium estimated reliably – Given that the FCA has projected a redress methodology which whitethorn alteration but gives affected lenders a reliable estimation of the redress which they volition wage this information is satisfied.

The FCA’s proposals trim uncertainty and volition let steadfast to marque meaningful provisions for redress.

Affected firms volition presently beryllium successful 1 of the pursuing positions:

• No redress provision

• A contingent liability disclosed

• A redress proviso already recognised

Lenders who presently bash not person a proviso successful place, should measure customers impacted and usage the projected redress methodology to cipher a provision. Lenders who already person a proviso successful place, should reassess their provisions. Under FRS 102 Section 21, the archetypal measurement should beryllium the champion estimation that an entity would rationally wage astatine the reporting date.

The inclusion of a redress proviso successful the accounts whitethorn person an interaction connected the going interest presumption of the affected lenders. The inclusion of a caller proviso oregon an accrued proviso volition trim the nett for the existent period, and the aboriginal payments of redress volition interaction aboriginal currency flows. Lenders should origin these impacts into their aboriginal currency travel forecasts and see whether this affects management’s conclusions successful narration to going concern.