Money Covered: The Week That Was – 8 May 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 faces legal challenges to motor finance compensation scheme

On 1 May 2026, the FCA issued a statement confirming that it had received legal challenges from Consumer Voice, Volkswagen Financial Services, Mercedez Benz Financial Services and Crédit Agricole Auto Financial concerning the proposed vehicle finance redress scheme under s.404 of FSMA.

The FCA has criticised the legal challenges, stating that they create fresh uncertainty for millions of consumers and for the second-largest consumer credit market. The FCA has confirmed that it will defend the legal challenges robustly on the basis that the proposed scheme is the best way to resolve such a widespread, long-running and complex issue.

The FCA has said that it is engaging with lenders and consumer groups to understand the breadth of views, and that it will provide further advice to firms next week.

To read more, please click here.

The read the FCA's policy statement on motor finance, please click here.

Auditors

FRC publishes revised UK auditing standards on fraud and going concern

The Financial Reporting Council has published final revisions to two UK auditing standards on fraud and going concern.

The revised standards are ISA (UK) 240, dealing with fraud in audit of financial statements, and ISA (UK) 570, dealing with going concern. The changes follow a public consultation and align UK requirements with recent changes to the equivalent international standards.

Key points to note:

• Auditors will need to carry out enhanced risk assessment procedures.
• External information about a company will need to be considered when assessing fraud risk.
• Auditors will need to look back at management decisions linked to previous accounting estimates, such as expected credit losses or asset impairments.
• Material misstatement due to fraud should be treated as a significant risk.
• Auditors should plan on the basis that management may override controls; and
• Auditors will need to remain alert to evidence that may cast doubt on an entity’s ability to continue as a going concern.

The revised standards apply to audits of financial statements for periods beginning on or after 15 December 2026.

The FRC expects the revisions to involve minimal additional work beyond the international standards, but they are likely to increase scrutiny where fraud risk or going concern is in issue.

To read more, please click here.

Mortgage brokers

Equity release lending falls in Q1 2026 amid economic uncertainty

Equity release activity slowed in Q1 2026 amid wider economic and interest rate uncertainty. Total lending fell 9% from the previous quarter (14% year-on-year) to £574m, with 12,958 new and returning customers accessing housing wealth (down 7% on the quarter and 10% annually). The Equity Release Council (ERC) reports that demand is being deferred rather than disappearing: 45% of advisers saw increased enquiries versus 33% reporting a fall, but fewer cases are progressing to completion. ERC chair David Burrowes attributes delays to higher borrowing costs, tighter LTVs and geopolitical uncertainty. Looking ahead, adviser sentiment points to a potential rebound: 46% expect enquiries and 50% expect applications to rise in Q2 2026 (20% expect falls). ERC CEO Jim Boyd anticipates equity release becoming an increasingly mainstream part of retirement planning, given demographic pressures, retirement income gaps and product developments.

To read the Equity Release Council press release see here.

Pensions

TPO reduces complaint backlog with closure rate increasing by 63% since 2023/24

The Pensions Ombudsman (TPO) has confirmed its case closure statistics with the publication of its Corporate Plan for 2026/27, which confirms a 14% increase in case closures over the last year and a 63% increase over the last two years. 

TPO notes that the progress follows a comprehensive Operating Model Review programme in 2023/24 that transformed how complaints are handled. This performance has unlocked additional funding from the Department for Work and Pensions, which TPO confirms will allow it to expand its frontline casework teams by 20% in 2026/27.

TPO confirms that the new three-year funding settlement (2026/27 to 2028/29) will support its drive to further reduce a long-standing backlog and reduce waiting times for complainants. That said, TPO acknowledges that tackling the backlog will take time "as a result of the continued increase in demand for TPO’s valuable service". On that basis TPO has said it is looking to invest in technology, including the launch of an internal AI pilot to help caseworkers progress cases more quickly.

To read TPO's press release and access the Corporate Plan please click here. 

Regulatory developments for FCA regulated entities 

FCA to carry out multi-firm review on bereavement processes

During a speech at the Morningstar Investment Conference on 7 May, FCA department heads Sara Woodroffe and Kate Tuckley confirmed the regulator's plans for the review, which is to be carried out later this year.  

The review builds on the FCA's previous work on consumer vulnerability. The review will consider the processes firms have around consumers going through a bereavement and the support systems in place for them.  The FCA said they wanted to ensure that these processes are "friction free" for consumers going through some of the toughest times of their lives.  

To read more, click here.

FCA to review claims management practices 

The FCA has announced a wide-ranging review of claims management practices, prompted particularly by concerns around motor finance claims but extending to other high volume consumer claims (including areas such as housing disrepair). The review will be conducted jointly with the Solicitors Regulation Authority (SRA) and will include FCA-authorised claims management companies (CMCs) and law firms. 

The review will focus on: 

• Whether consumers receive “fair value” from CMCs, including whether existing price caps remain appropriate where free redress routes exist.
• Financial incentives and fee structures (including funding and insurance) that may create conflicts of interest or drive poor conduct and outcomes.
• The full consumer journey – from lead generation and marketing through to claim resolution. This includes aggressive marketing, misleading advertising, unfair exit fees, and inadequate explanations of terms.
• The impact of different regulatory regimes and whether some firms are operating without appropriate permissions.

Although the FCA and SRA recognise that CMCs greatly assist consumers to bring complaints and receive compensation, in the wake of the poor handling by some CMCs and law firms in respect of the motor finance redress scheme, this review is the first step in the regulators improving standards in this market. 

Further information on the review is expected by mid-May. 

To read more, please click here.

With thanks to this week's contributors: Heather Buttifant, James Parsons, Brendan Marrinan, Ben Simmonds, Alison Thomas and Kerone Thomas

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