Money Covered: The Week That Was – 10 July 2026

Welcome to The Week That Was, a round-up of key events in the financial services sector over the last seven days.

The fifth episode of Season 4 of our podcast, Money Covered – The Month That Was, where the team looks at the Financial Conduct Authority's Vehicle Finance Redress Scheme Consultation, is now available.

To listen to this and all previous episodes, please click here.

Headline development

FCA opens 11 investigations for breaches of Consumer Duty

On 7 July 2026, the FCA published its second edition of Enforcement Watch which focuses on its recent approach to supervising and enforcing the Consumer Duty. The FCA has opened 11 investigations into potential breaches of Consumer Duty in the past two years. It has been almost three years since the Consumer Duty was introduced for open products.

The FCA has stated that its "assertive options range from a conversation to the imposition of requirements. Where our interventions are sufficient to address the harm, there may be no need for a formal enforcement investigation." The FCA intervened in this way 382 times in the past year.

Of the 11 open investigations, one relates to a wealth management firm in relation to financial promotions, high fees and the quality of engagement with the FCA. Three investigations have also been opened into firms operating in the home and travel insurance sector, in respect of claims and complaints handling. Overall, more than half of the FCA's investigations are in the insurance sector.

The FCA had recognised that firms would need some time to embed the Consumer Duty, and that it did not expect to use its enforcement powers immediately. However, the FCA's tolerance period for implementing the Consumer Duty is firmly over, with further scrutiny now facing firms.

To read the FCA's Enforcement Watch, please click here.

Regulatory developments for FCA regulated entities

FCA says regulation supports growth and innovation

On 8 July 2026, the deputy chief executive of the FCA, Sarah Pritchard, gave a speech at the Whitehall Industry Group, covering the progress of the FCA's operations to balance growth and risk. The regulator is trying to reconcile two objectives often presented as competing; protecting consumers and supporting economic growth. The key message was that good regulation is not about choosing one over the other, but about being explicit on trade-offs, being operationally effective and using data and technology to focus regulatory effort where it delivers the greatest impact.

The speech highlights a set of pro-growth actions as evidence that the FCA’s approach is practical rather than rhetorical, and gave the example of the Targeted Support regime, which already has 7 firms approved since the launch in April this year, with another 23 firms having applications with the regulator.

Ms Pritchard wants to shift perceptions of what the FCA does day-to-day. She considers the FCA an "operational agency", the scale of which justifies a technology-enabled operating model. The FCA argues for a risk-based model supported by data infrastructure to triage issues, identify harm earlier, and intervene more precisely, and claims it has redirected freed capacity towards more significant matters, faster.

The speech also notes a push to be more open about supervision via the publication of Enforcement Watch, described as explaining how supervisory tools are being used to drive Consumer Duty improvements and providing an update on the enforcement pipeline. One cited example is securing "£194m for customers" following affordability complaints involving a guarantor lender.

To read the speech, please click here.

FCA finds widespread failings for consumers accessing Basic Bank Accounts

On 7 July 2026, the FCA published its findings following a mystery shopping exercise assessing consumer access to Basic Bank Accounts (BBA), finding that firms weren’t giving enough support to people who might need a BBA.

BBAs are for those who may not be able to access standard current accounts, providing them with access to banking services with no fees and no overdraft, in order to receive wages and benefits, pay bills etc. Around 4.3 million UK adults now have a BBA and the 9 largest standard personal current account providers in the UK must offer BBAs to legally resident consumers.

The FCA found that good outcomes can be delivered, but that this is not consistent, and poor practices are still widespread. In particular, it was found that there is a significant risk that firms will turn consumers away before they can apply for a BBA. The FCA has confirmed that, following their review, the nine banks have committed to addressing the key issues found.

To read the FCA statement, please click here.

Emerging risks

The Mills Review: the FCA's review of unregulated AI financial advice

The Mills Review, commissioned by the FCA, recommends an urgent review of general-purpose AI platforms that provide "advice-like" financial guidance. The review assesses how AI could reshape UK retail financial services by 2030 and is presented as the first regulator‑initiated review of its kind globally.

The review warns that AI tools are influencing decisions on savings, investments, pensions and mortgages without being subject to the same regulatory requirements as authorised financial advisers, creating consumer protection risks and an uneven competitive landscape.

The review identifies four AI-driven shifts; transformation of firm operations, evolution of consumer journeys, reshaping of competition/market power and amplification of fraud and cyber risks. FCA‑commissioned research suggests there is consumer appetite for agentic AI (autonomous actions within preset goals), with approximately 11 million UK adults likely to use it, but with concerns about trust and control.

It also highlights that many consumers mistakenly believe they are protected by the FOS or FSCS when using AI for financial advice. The review warns that AI providers could become competitive market gatekeepers by influencing how financial products are recommended and selected. It also has the potentials to undermine traditional financial advice by steering customers away from regulated financial services providers.

The review highlights potential benefits (access, personalisation, efficiency) alongside risks (fraud, cyber, consumer harm, market concentration). It makes seven recommendations, including adapting the regulatory perimeter, scaling the FCA's AI Lab, enabling agentic finance and AI‑enabled supervision and creating a trusted public‑interest financial capability service. The FCA is encouraged to assess whether existing rules on financial advice, guidance and financial promotions adequately cover AI tools and, if necessary, amend its guidance or seek additional regulatory powers. Despite the risks, the review acknowledges that AI could help narrow the UK's financial advice gap by improving access to guidance.

To read the press release, please click here, and to read the full Mills Review, please click here.

Relevant case law updates

Court of Appeal upholds High Court decision contractual term charging default interest not a penalty

In Houssein v London Credit Ltd [2006] EWCA Civ 830 the Court of Appeal upheld a High Court ruling holding that a contractual term allowing a lender to charge default interest was enforceable.

The borrowers appealed on the grounds that the judge had erred in their application of the test in Cavendish Square Holding BV v El Makdessi [2015] UKSC 67 which involves the proportionality of penalties and the enforceability of the same. The borrowers argued that the Cavendish test was incorrectly applied by the court taking into account events which post-dated the loan, and on the basis that the lender's credit risk interest was also adequately protected without the deterrent of a default interest rate compounded monthly.

The Court of Appeal dismissed the appeal, holding that the High Court had correctly applied the Cavendish test, stating that the test as to whether the default rate was extortionate depended on what an objective party would have thought at the time the agreement was entered into. In this case, they held that a reasonable lender would have considered the prospect of refinancing this loan so precarious that it was not extortionate to apply an above-market default interest rate to reflect the difficulty it would have faced in refinancing the loan.

To read the full judgment, please click here.

High Court considers recovery of litigation costs as damages

In Musst Holdings Ltd v Astra Asset Management UK Ltd [2026] EWHC 1599 (Ch), Leech J dismissed the claimant’s attempt to recover after-the-event (ATE) insurance premiums, litigation funders’ fees and a court issue fee as damages for negligent misrepresentation. The claimant alleged that negligent misrepresentations caused it to bring two sets of proceedings rather than one, resulting in additional funding and court costs.

The judgment considered the tension between the compensatory principle in tort (restoring the claimant to the position it would have been in "but for" the wrong) and the costs principle which generally prevents a party from recovering litigation costs as substantive damages between the same parties.

Applying the approach endorsed in Hirachand v Hirachand [2024] UKSC 43, Leech J held that litigation costs can only be recovered as damages where (i) the claimant has a separate and independent cause of action, and (ii) the earlier proceedings were not subject to the ordinary civil costs rules. Those conditions were not satisfied on the facts.

Leech J also noted the recovery of ATE premiums was barred by section 58C(1) of the Courts and Legal Services Act 1990. The funder’s fees were characterised as litigation costs and as voluntary/collateral payments and were not recoverable on “but for” causation or reasonable foreseeability grounds. The court issue fee was likewise treated as an irrecoverable litigation cost.

To read the full judgment, please click here.

No litigation privilege for communications created for litigation funders to assess commercial viability

In White v Uber London Ltd [2026] EWHC 1610 (Comm), the High Court held that litigation privilege does not extend to communications created primarily to enable a litigation funder to decide whether to finance a claim, even where those communications assess the merits of the case. The High Court ordered limited disclosure of documents generated while Mishcon de Reya was retained by litigation funder Harbour to investigate potential claims against Uber. Birt J found the "Harbour communications" were likely relevant to a preliminary issue on limitation (including what individual drivers actually knew, and what they could reasonably have discovered). Although legal advice privilege could apply to some communications, litigation privilege did not. The court distinguished between preparing for the conduct of litigation and assessing its commercial viability, finding that the latter does not satisfy the dominant purpose test for litigation privilege. However, some documents may still be protected by legal advice privilege, which must be assessed on a document-by-document basis. The Court found that the dominant purpose was enabling Harbour to decide whether to fund the litigation, not conducting it.

Regarding control, the Court held that the documents were within the Claimants' control because their solicitors, Mishcon de Reya, were obliged to disclose information material to the retainer unless the Claimants had given informed consent otherwise. A general confidentiality clause was insufficient to constitute informed consent, as the Claimants had not knowingly waived those rights. Consequently, documents created while acting for a litigation funder may later fall within a claimant's control for disclosure purposes if the firm subsequently acts for the Claimant.

The decision highlights the limits of privilege in the context of litigation funding and reinforces the importance of careful document management.

To read more, please click here, and to read the full judgment, please click here.

With thanks to this week's contributors: Lauren Butler, Haiying Li, Damien O'Malley, Daniel Parkin, Dorian Nunzek, Brendan Marrinan.

If you have any queries please do get in contact with a member of the team, or your usual RPC contact.