Fintech, digital assets, payments and consumer credit | UK Regulatory Outlook September 2025

Fintech

FCA Handbook Notice 132 

On 1 August 2025, the Financial Conduct Authority (FCA) published Handbook Notice 132, including changes to the FCA Handbook made by the FCA board on 26 June, 30 June, 10 July, 18 July and 31 July 2025. 

Of particular note is the FCA lifting its ban on retail access to certain cryptoasset exchange traded notes (cETNs) from 8 October 2025. Changes to the handbook set out in the Conduct of Business (Cryptoasset Products) Instrument 2025 (FCA 2025/37) enable the sale, distribution and marketing of cETNs to retail clients where these are admitted to trading on a UK recognised investment exchange. 

The Handbook Notice reflects other changes made to the handbook made by the following instruments: 

• The Non-Financial Misconduct Instrument 2025 (FCA 2025/29).
• The Periodic Fees (2025/2026) and Other Fees Instrument 2025 (FCA 2025/22).
• The Mortgage Rule Review (Execution-Only, Affordability and Expired Terms) Instrument 2025 (FCA 2025/34).
• The Data Decommissioning (No 2) Instrument 2025 (FCA 2025/39). 

The next FCA board meeting is scheduled for 2 October 2025. 

FCA insights from 2024 cyber co-ordination group meetings 

On 14 August 2025, the FCA published an overview of insights from its 2024 quarterly cyber co-ordination group meetings, grouped under the following topics: 

• Reconnection framework and third-party management: participation in cross-industry information sharing forums was found to help enable effective collective communication with third-party suppliers during significant outages.·  
• Threat and vulnerability management and threat-led penetration testing: threat-led penetration testing was found to be an extremely effective tool for identifying previously unknown cyber vulnerabilities. The FCA highlighted that (i) firms should not underestimate the impact of combined or cumulative vulnerabilities and (ii) the same security risk management should apply to legacy technology as for any other system.·  
• AI and other emerging technologies, including quantum computing: implementing AI functionality into cyber domains without taking steps to fully understand all potential impacts can lead to increased exposure to unidentified risks. 

Although the insights do not introduce any regulatory expectations at this stage, firms should consider them within the context of the FCA's existing expectations for them to learn from other firms and to help strengthen their cyber resilience. 

FCA publishes policy statement on changes to safeguarding regime for payments and e-money firms 

On 7 August 2025, the FCA published policy statement PS25/12, setting out changes to the safeguarding regime for payments and e-money firms, alongside feedback on its consultation launched in December 2024 (CP24/20).  

The proposals for the interim state – now called the "supplementary regime" – will be implemented largely as proposed, with some modifications. The supplementary regime will come into effect on 7 May 2026, reflecting an increase in the proposed implementation period, from six to nine months. 

In a significant win for the industry and a clear example of the FCA listening, the end-state proposals – now called the "post-repeal regime" – have been deferred for the foreseeable period (two years), until at least the fourth quarter of 2027. 

Changes made are within the Payment and Electronic Money (Safeguarding) Instrument 2025, which will come into force on 7 May 2026, together with related amendments to the payment services and e-money approach document. 

FMLC responds to FCA consultation on stablecoin issuance and cryptoasset custody rules 

On 11 August 2025, the Financial Markets Law Committee (FMLC) published  a response to the FCA's consultation on proposed rules and guidance for firms carrying on the regulated activities of issuing qualifying stablecoins and safeguarding qualifying cryptoassets (CP25/14). 

The FMLC warns of potential legal uncertainty and unintended consequences, highlighting four pressure points: 

• the current formulation of "issuing qualifying stablecoin" activity: gives rise to significant uncertainty as to which entities and activities are intended to be within scope;
• the proposed definition of "qualifying stablecoin" refers to fiat currency, but this term is not itself defined;
• the FMLC recommends adopting a more outcomes-focused approach rather than mandating qualifying stablecoin issuers should hold backing assets in a statutory trust (particularly important for global firms); and
• whether the broad definition of safeguarding has been taken into account when drafting CASS 17 rules. 

FCA report on using synthetic data in financial services 

On 19 August 2025, the FCA published its second report on the use of synthetic data in financial services, co-authored with members of the synthetic data expert group (SDEG).  

Synthetic data is created by statistically modelling original data, then using those models to generate new data values reproducing the original data's statistical properties – with the aim of improving data utility and preventing disclosure of confidential information. 

The report includes responses to key feedback from the FCA's March 2022 call for input and draws out nine key principles for firms to consider when developing their own approaches, including: 

• accountability: clear accountability structures for data, algorithmic and AI systems, including third-party tools and managed service providers, with documented chains of responsibility;·        
• safety: design systems which prioritise reliability, robustness, accuracy and safety;       
• transparency: maximise information available to decision-makers validating the system and its outputs;     
• security and privacy: protect both data security and individual privacy rights throughout the data lifecycle; and       
• fairness: systems that process or impact social or demographic data are designed to prevent discriminatory outcomes. 

The report does not constitute FCA guidance, rather it seeks to highlight insights and best practices identified by SDEG members. 

Payments 

PSR policy statement on decision to revoke Specific Directions 4 and 4a 

On 14 August 2025, the Payment Systems Regulator (PSR) published PS25/6, setting out its decision to revoke both Specific Direction 4 (SD4), on the competitive procurement of central infrastructure relating to LINK, and SD4a that varied SD4. 

The PSR has decided that mandating a competitive procurement process is no longer the best way to address the competition issues related to the provision of critical payment infrastructure for LINK, and that continuing with this requirement would significantly increase cost. The SD given to Pay.UK revoking SD4 and SD4a will come into force on 25 August 2025. The PSR plans to continue monitoring and evaluating changes to market conditions and their impact on the UK's retail payment infrastructure, to include engagement with LINK and Vocalink, adapting its supervisory approach as appropriate. 

PSR policy statement on decision to revoke Specific Directions 2 and 2a 

On 14 August 2025, the PSR published PS25/7, setting out its decision to revoke both Specific Direction 2 (SD2) and Specific Direction 2a (SD2a), which required all central infrastructure for Bacs to be competitively procured. 

The SD given to Pay.UK revoking SD2 and SD2a will come into force on 27 August 2025. 

The PSR will continue to monitor Pay. UK's work and adapt its supervisory approach as appropriate, working with the BoE to maintain close regulatory oversight of Pay.UK before it extends the current Bacs contract with the existing supplier. 

BoE announces upcoming work from Retail Payments Infrastructure Board 

On 13 August 2025, the Bank of England (BoE) published a new webpage on the National Payments Vision, reflecting the announcements made by HM Treasury and the BoE in July 2025 on the work of the Payments Vision Delivery Committee (PVDC). The BoE has set out more information on work to be undertaken by the PVDC in H2 2025: 

• September 2025: the BoE will publish further communications on the establishment of the Retail Payments Infrastructure Board (RPIB) and the membership application process. In the same month, the BoE, HM Treasury, the FCA and the Payment Systems Regulator will engage with members of the Vision Engagement Group to discuss the PVDC's strategy;  
• October and November 2025: the first RPIB meeting will be held in late October 2025, following the appointment of RPIB's members. The PVDC intends to publish its strategy for retail payments infrastructure in October or November 2025;  
• December 2025: the PVDC will publish the payments forward plan by the end of 2025;
• Early 2026: information on RPIB's approach to wider stakeholder engagement and the processes by which it will publish a consultation will be published in early 2026. 

Consumer finance 

FCA review of digital design in consumer credit customers' online journeys 

On 31 July 2025, the FCA published its findings on how consumer credit firms use digital channels to acquire customers and customer outcomes, in light of the consumer duty.  

Although the FCA found that lenders' digital platforms could help customers understand products and support good consumer outcomes, it suggested several improvements including: 

• design: firms should consider adapting the design of their digital journeys to better meet target customers' needs, ensure support for vulnerable customers, avoid layouts that drive customers towards certain decisions and avoid prioritising speed over customer interests;
• testing and quality assurance: firms should test how key product details such as fees and features are presented, whether language reflects the target market (especially for complex products) and whether end-to-end journeys enable customers to fully understand a product's features; and
• management information and oversight: data suggests customers are moving too quickly through journeys without accessing key information or features, firms should improve their digital design accordingly. 

The FCA will continue to monitor firms' approaches to digital journeys and app design, taking these into account when considering their approach to the consumer duty. The above findings apply to all regulated firms with a digital presence, not just consumer credit providers. 

FCA warns CMCs over poor practices in motor finance commission claims 

On 31 July 2025, the Solicitors Regulation Authority (SRA) published a press release with the FCA, warning law firms and claims management companies (CMCs) over poor practices in motor finance commission claims. In anticipation of the Supreme Court judgment in Johnson – and the prompt announcement of a redress scheme consultation (see further below) – the FCA clarified that: 

• CMCs should inform clients of the existence of a redress scheme, or where there is a realistic prospect of one being introduced, which would allow them to pursue a claim for themselves, free of charge;
• clients should be made aware before an agreement is signed (even if the redress scheme has not yet been confirmed); and
• CMCs must inform customers of their right to exit the agreement at any time and any fee that may be payable by them (which must be reasonable and reflect the work actually undertaken). 

Submitting a claim through a CMC may result in consumers sacrificing up to 30% of any compensation.  

Supreme Court judgment in motor finance case 

On 1 August 2025, the long-awaited decision in Johnson v FirstRand Bank Limited (London Branch) t/a MotoNovo Finance  was handed down by the Supreme Court. Key points from the decision include: 

Fiduciary duty: Car dealers do not owe a fiduciary duty.  Being in a position to influence or affect the borrower's decision on finance is not enough for a fiduciary duty: for a fiduciary duty, there must be a single minded duty of loyalty that prevents the fiduciary from having a personal interest in the transaction. This is in contrast to the Court of Appeal's decision which said a fiduciary duty was owed. 

'Unfair' relationship between lender and consumer under Consumer Credit Act 1974: the Supreme Court ruled that insufficient disclosure could create an unfair relationship, however it is only one element relevant to the question of unfair relationships in this context. Others include the size of the commission relative to the credit, the nature of the commission, the characteristics of the consumer and compliance with regulatory rules.  

In contrast to the Court of Appeal, the Supreme Court found the following issues irrelevant, on the basis that if there is no fiduciary duty, no bribery can occur: 

• "Secret" commissions.
• Lenders' liability in tort of bribery.
• Insufficient disclosure to procure consent. 

Firms are advised by the FCA to refresh their estimates of potential liabilities – both potential compensation payments and associated administrative costs – and make sufficient provision as needed. The FCA reiterates that those who have already complained do not need to do anything further – and those who think they have overpaid, should complain now. 

The Supreme Court’s judgment in Johnson v FirstRand (MotoNovo) confirms car dealers do not owe a fiduciary duty simply because they can influence a borrower’s finance decision; a fiduciary duty requires singleminded loyalty that rules out personal interest.  

For “unfair relationship” claims under the CCA 1974, insufficient disclosure may contribute to unfairness but is only one factor alongside commission size and nature, consumer characteristics and regulatory compliance. Without a fiduciary duty, issues of secret commissions, tortious bribery and consent via disclosure are irrelevant to bribery claims. The FCA advises firms to refresh liability estimates and provisions, and reiterates that existing complainants need take no further action, while consumers who believe they overpaid should complain. 

For more detail, see our Insight. 

FCA to consult on motor finance compensation scheme 

On 3 August 2025, the FCA confirmed – following the Supreme Court's judgment – that it will be consulting on a potential redress scheme for those consumers who may have lost out where a lender has acted unfairly, and therefore unlawfully. 

The consultation is expected by early October and is to be finalised in time to allow compensation to start in early 2026. It will consider how a combination of factors may point to an unfair relationship between lender and borrower as well as how redress could be calculated. 

The FCA has provided some insight into what we can expect to see in October: 

Redress: 

• Discretionary commission arrangements (DCAs): the FCA will propose that any redress scheme covers DCAs if not properly disclosed, and consult on which non-discretionary commission arrangements should be included.
• Redress calculation: to be informed by the degree of harm suffered by the consumer, as well as the need for consumers to access affordable motor loans in future. A de minimis threshold will be considered.
• Interest: the FCA will consult on an interest rate for each year of the scheme (average base rate plus 1%) – that is, a simple interest rate of around 3% per year.
• Compensation per consumer: the FCA expects that most individuals would receive less than £950 per agreement held in compensation.
• Estimated overall cost: the FCA considers that the cost of such a scheme (including administrative costs) would fall somewhere between £9-18 billion. 

Timeframe: the FCA proposes that the scheme covers agreements going back to 2007, for consistency with the FOS complaints already being considered. 

Opt in / opt out: although the FCA is yet to decide whether it will operate an opt in or opt out scheme, firms will be required to make consumers aware of the possibility of compensation. 

House of Lords calls for shorter redress period for UK motor finance 

On 8 August 2025, and following the decision handed down by the Supreme Court last week, the House of Lords' Financial Services Regulation Committee wrote to the FCA, asking it to clarify several points, including the timeframe for its proposed redress scheme. 

The committee considers that instead of redress being paid on loans taken out from 2007 onwards, the timeframe should align with the six-year limitation period under the Consumer Credit Act 1974 and has asked the FCA to provide the "legal grounding" for its proposal. 

Lord Forsyth of Drumlean, committee chair, also requested further details on modelling the costs of the scheme, estimated administrative costs and the likely impact on the motor finance market. 

The committee has requested the FCA to appear before it in September 2025. 

FCA letter to CMCs on financial promotions regarding motor finance 

On 4 August 2025, the FCA published a letter (dated 31 July 2025) sent to claims management companies asking them to review their financial promotions relating to motor finance claims to ensure compliance with relevant rules in the FCA Handbook, including the consumer duty. 

The FCA asks them to: 

• review and revise their financial promotions to ensure they are clear, fair and not misleading (this includes removing any references to exaggerated claim amounts and avoiding using terms such as "up to" unless they are accurately sourced, contextualised and not likely to mislead);·        
• avoid misleading outcome guarantees (all promotional content must make it clear that eligibility and outcomes depend on individual circumstances and proper investigation);·   
• avoid using language that implies a false sense of urgency; and      
• maintain ongoing oversight: audits live promotions regulatory and promptly updating or withdrawing any materials that become non-compliant. 

The FCA will proactively monitor the market to assess compliance and consider appropriate action where it identifies non-compliance. 

Clause allowing appointment of replacement service of process agent without notice deemed unfair 

On 8 August 2025, in Regera SARL v Cohen and others [2025] EWHC 2107 (Comm), the Commercial Court set aside default judgments obtained by the claimant against the defendants (as guarantors of a facility agreement between the claimant and the defaulting borrower), for failure to file acknowledgments of service or defences. 

The claimant had purported to serve proceedings via a service of process agent appointed by them under a clause in the facility agreement which allowed them to appoint a replacement agent without notifying the defendant, if the original agent was unable to act. The defendant claimed they were unaware of service until two days after entry of the default judgments. 

The judge voiced "considerable concerns" about the fairness of the clause, as it allowed a replacement agent to be appointed without notice to the defendant, which created "imbalance" in the parties' legal rights and obligations. The clause was therefore unfair under section 62 of the Consumer Rights Act 2015.