Complaints Root Cause: FCA FG26/2 Explained

Most firms count complaints. Fewer ask what the pattern of complaints says about a wider problem and who else it affects. In March 2026 the FCA published finalised guidance on good and poor practice in identifying and rectifying harm, which puts root cause analysis at the centre of complaints handling. This guide summarises what the guidance says. It supports our Complaints, Root Cause and Redress course overview, and builds on our guide to the FCA Consumer Duty.

What the guidance is

The document is FCA Finalised Guidance FG26/2, "Good and Poor Practice on identifying and rectifying harm", dated 16 March 2026. It is aimed at firms carrying out redress exercises, whether proactive or firm-led and of any scale. It supplements the Consumer Duty guidance in FG22/5 and does not replace Handbook requirements. For non-retail customers, it says firms should have regard to Principles 6 and 7.

Complaints as an early warning

The guidance expects firms to identify and put right problems caused by their own actions or inactions. It points to DISP 1.3.3R, under which firms must have management controls that identify recurring or systemic issues and take reasonable steps to remedy the problems that cause complaints. The FCA also notes that where a firm fixes a problem effectively, customers may not need to complain or go to the Financial Ombudsman at all. Firms are told to have regard to the FCA's December 2024 findings on complaints and root cause analysis.

Finding the root cause

The guidance says firms must be able to identify when a complaint's root cause links to a wider systemic or recurring issue. It suggests deciding what data to use, including customer behavioural insights, file reviews, and feedback from staff, customers and the distribution chain. Once an issue is identified, the firm should assess its root cause, how many customers are affected, whether vulnerable customers are affected differently, whether Financial Ombudsman decisions exist on the same issue, and how long the issue has been going on.

Good practice on complaints data

Examples of good practice in the guidance include reviewing complaints monthly and grouping them by likely cause, and investigating sudden surges in complaints. In one example, a firm found a surge linked to a temporary system change and decided no further action was needed. Firms may use a central complaints forum, a central data team combining complaints, sales and customer data, or external compliance reviews. Each complaint and its resolution should be recorded, as DISP 1.9.1R requires.

Governance and records

The guidance expects clear processes so colleagues know what to report to senior personnel, how and when, and it expects firms to consider how their governing body will oversee redress exercises. Firms must keep records of the analysis and the decisions by senior personnel on root cause management information, and good practice includes recording how root causes were identified and how many customers were affected. Under Principle 11, the guidance says firms should notify the FCA of systemic or recurring issues, or failures to prevent foreseeable harm, where they decide to offer redress.

Examples that show the judgement involved

The guidance includes worked examples. In one poor-practice example, a firm excluded redress payments under £250 without analysing the circumstances of the affected customers. In another, a firm assessed open complaints following Financial Ombudsman decisions but did not identify affected customers who had not complained. A good-practice example describes a firm that excluded customers affected more than six years earlier, but whose governing body later reversed that decision because those customers may not have known of the issue. Another good-practice example describes a firm that treated a one-day system error with minimal price impact as not requiring proactive redress, but informed affected customers and invited complaints.

Judging whether harm is foreseeable

The guidance asks firms to consider whether they have caused foreseeable harm or identified recurring or systemic problems, and to put right the harm where that is reasonable and appropriate. It also points to SUP 15.3.3G, which suggests weighing the probability of an issue against its severity when deciding what to tell the FCA. Another good-practice example describes a firm that refunded a one-month overcharge caused by a system error. Read together, the examples show that the guidance leaves room for judgement, but it expects the judgement to be reasoned and recorded rather than assumed.

Using this in a complaints role: our suggestions

These steps are our suggestions, not requirements in the guidance.

• Tag every complaint with a cause code and review the codes monthly, as the good-practice examples describe.
• For each recurring cause, record how many customers are affected, including those who have not complained.
• Check that exclusions in any redress exercise, such as small amounts or older cases, are justified in writing.
• Ask whether vulnerable customers are affected differently, and record the answer.

For structured learning, browse our CPD courses.

What we could not confirm

We read the guidance as a PDF and did not read the FCA's December 2024 findings that it cross-refers to. We did not read DISP 1.3 or DISP 1.9 in full from the Handbook. This post covers UK firms only: the Central Bank of Ireland has its own complaints requirements, which we have not covered here. Check the current guidance before relying on this summary. This post is general information, not legal advice.