Money Covered: The Week That Was – 9 January 2026

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

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

On the fifth episode of Season 4 of our podcast, Money Covered – The Month That Was, Mel is joined by David Allinson to discuss the FCA’s proposed section 404 consumer redress scheme for vehicle finance.

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

Headline development

CMC under FCA investigation now named following dismissal of High Court challenge

The FCA is investigating a claims management company (The Claims Protection Agency Limited) (TCPA) regarding its promotion of motor finance claims.  The FCA are investigating allegations that TCPA have advertised that consumers could achieve much higher compensation than what has been prescribed under the FCA's motor finance redress scheme. The regulator is also investigating what customers were told about the costs of making a claim and whether they were pressurised to sign up.

The investigation follows a significant period of change for the FCA, as they push to advertise the 'lawyer free' compensation scheme for motor finance customers under s.404 of FSMA. Despite this free scheme, CMCs continue to advertise their services to customers wanting to access the compensation scheme.

TCPA were notified of the FCA's intention to open enforcement proceedings in September 2025. Following the notification, TCPA made a claim for judicial review to challenge FCA's decision to investigate. 

The dismissal of the firm's challenge

In October 2025, the High Cout handed down the first part of its judgment following TCPA's challenge of the FCA's decision to publicly name the firm as the subject of an FCA investigation on the basis it was unlawful and unreasonable. The High Court disagreed and dismissed the substantive claim but the first part of the judgment handed down in October anonymised the firm as CIT.

The full judgment could not be released in October as the firm was still in the process of seeking permission to appeal the decision to allow the FCA to publicly name them.  Permission to appeal was denied in December 2025 and so the second part of the High Court judgment, revealing the name of the firm alongside other details, was released this week. 

The FCA also issued a press release this week concerning the investigation, confirming that while it is not usual to publicly name firms who are being investigated, the FCA is permitted to do so in exceptional circumstances, and that exceptional circumstances existed in this case. TCPA has said on its website that it is taking a ‘short pause’ to update its advertising and sign-up processes.

To read the FCA press release, click here.  To read the recent judgment, click here.

Insolvency practitioners

Insolvency Service releases monthly insolvency stats for November 2025

The Insolvency Service (the IS) has published its insolvency statistics for November 2025 in England and Wales. The data reveals corporate and individual insolvencies have declined when compared to the prior month noting that in November there were 1,866 company insolvencies (8% lower than October 2025), and 9,343 individual insolvencies.

Tom Russell, President of R3, explained that whilst the decline may "give a glimmer of hope to struggling businesses", businesses must remain cautious particularly those in hospitality as trade drops-off following the Christmas period.

For individuals, the IS notes that whilst the insolvency rates have declined, there is a backlog of cases yet to be accounted for following the IS' transition to a new case management system and the effects of spending over the festive season are yet to be seen.

Overall, whilst corporate and individual insolvencies have recently declined, insolvency levels remain high when compared to five years ago demonstrating that there is still a long way to go.

To read more, please click here.

Regulatory developments for FCA regulated entities

Updated FOS interest rate now linked to Bank of England base rate

From 1 January 2026, a new interest rate applies to compensation payments awarded by the Financial Ombudsman Service (FOS) in cases referred on or after that date.

The update follows a consultation last summer. As a result, the default interest rate used in certain compensation cases has been revised. Instead of using a fixed rate, FOS will now apply a rate based on the Bank of England’s average base rate, plus one percentage point.

The new rate applies where interest is due for the period between the date the consumer suffered the financial loss and the date compensation is paid. FOS confirmed that interest will be calculated as a weighted average over that period. To support firms in estimating what may be owed under this updated approach, FOS has published a calculator.

Where a consumer has lost out due to a firm’s error, FOS can require both compensation and interest to be paid. The aim remains the same: to return the consumer to the position they would have been in had the issue not occurred. There are different types of interest that may be awarded. One applies where a consumer has been ‘deprived’ of money, for example, where an insurance claim was wrongly declined. This is in addition to any award for the actual financial loss.

According to FOS, the change is intended to better reflect economic conditions while maintaining a fair, simple, and proportionate approach. The 8% simple interest rate, which applies where a business fails to pay compensation on time, remains unchanged.

To read more, please click here.

FCA announces changes to the ancillary activities test

Under the ancillary activities exemption (AAE), pursuant to Financial Services and Markets Act 2000, firms are permitted to trade in commodity derivatives and emissions allowances without needing to be authorised as an investment firm by the FCA. For a firm to be eligible for the AAE, it must satisfy the ancillary activities test (AAT).

In July 2025, the FCA published a consultation paper on the AAT with a view to simplifying the procedure for firms to determine whether they are eligible under AAE. Under the proposals, there would be three tests which are separate and independent from one another, and a firm would be able to rely on the AAE if it met the requirements of any of the three tests. Included with that would also be a new annual threshold test, which would exempt firms trading in commodity derivates below £3bn. Two of the existing tests (trading test and capital employed test) were also subject the proposed changes.

The FCA published a policy statement on 19 December 2025, reporting that, overall, there was a positive response to the proposed changes, albeit there were elements of the annual threshold test which raised significant concerns. This prompted the FCA to makes changes to the annual threshold test, to only include cash-settled commodity derivatives but not exchange-traded derivatives.

The existing methodology for the trading and capital employed test is being retained. These tests calculate a firm's relevant trading activity against the group's activities. The thresholds for both tests will be at 50%.

To read the FCA's July 2025 publication, please click here.

To read the FCA's December 2025 publication, please click here.

With thanks to this week's contributors:James Parsons, Alison Thomas, Daniel Goh, Heather Buttifant, Ben Simmonds, Kerone Thomas, and Rebekah Bayliss