FCA updates BCOBS 5 on set-off, Consumer Duty and financial difficulty

The Financial Conduct Authority has updated BCOBS 5, the post-sale section of its Handbook covering retail banking services, with new and revised guidance taking effect on 26/06/2026¹. The chapter page states that "BCOBS 5 Post sale was last updated on 26/06/2026"². Three provisions carry that date: BCOBS 5.1.2G on the order in which payment instructions are processed, BCOBS 5.1.3AG and 5.1.3BG on set-off, and BCOBS 5.1.4G on dealings with customers in financial difficulty¹.

On payment ordering, the new guidance says that in determining the order in which to process payment instructions, a firm "must have regard to its obligations under the Consumer Duty"¹. On set-off, the guidance states that where a firm proposes to exercise a right of set-off, a firm other than a credit union should, in its dealings with consumers, review the information available to it about the consumer's account on an individual basis and estimate the amount of any subsistence balance, and should refrain from setting off debts or debit balances against that subsistence balance¹. It also says firms should not set off debts against money where a third party is beneficially entitled to it, where the consumer is a fiduciary in respect of it, or where the consumer has received it from a government department, local authority or NHS direct payment body for a specific purpose, or is under a legal obligation to a third party to retain and deal with it in a particular way¹.

Where a firm discovers after exercising set-off that it has set off against a subsistence balance or such money, the guidance says it "should refund to the consumer the sum debited from the account of the consumer in exercise of the right of set-off unless it is fair not to do so"¹. If it does not refund, it should be able to justify that it is fair not to do so and should consider other remedial action¹.

On financial difficulty, the guidance states that the Consumer Duty requires a firm to act to deliver good outcomes for retail customers, and that "a firm should act to deliver good outcomes for a banking customer whom it has reason to believe is in financial difficulty"¹.

The chapter also sets out unchanged provisions with earlier dates, including the requirement to provide a service that is "prompt, efficient and fair" to a banking customer (BCOBS 5.1.1R, 01/11/2009), rules on moving a retail banking service (BCOBS 5.1.5R and 5.1.5AR, dated 01/11/2009 and 01/12/2016), lost and dormant assets (BCOBS 5.1.9R and 5.1.10R, dated 01/11/2009 and 01/08/2022), and security of electronic payments (BCOBS 5.1.10AR, 13/01/2018)¹. The chapter also refers to a £35 maximum liability for a banking customer for losses in respect of unauthorised payments, with exceptions where the loss, theft or misappropriation of the payment instrument was not detectable by the customer prior to the payment¹.

Why it matters for households

The changes take effect on 26/06/2026 and apply to firms providing retail banking services to consumers, other than credit unions in the case of the set-off guidance¹. For households, the set-off guidance concerns what happens when a bank uses money in an account to cover a debt owed to it, such as an overdraft. The guidance directs firms to estimate a subsistence balance and not to set off debts against it, and to avoid setting off against money belonging to a third party or paid by a government department, local authority or NHS direct payment body for a specific purpose¹. Where set-off has already happened in those circumstances, the guidance says the firm should refund the amount unless it is fair not to do so¹. The payment ordering guidance means the sequence in which payments are processed must take account of Consumer Duty obligations, which can affect which payments are paid and which incur charges¹. The financial difficulty guidance restates that firms should act to deliver good outcomes for customers they have reason to believe are in financial difficulty¹. The FCA Handbook guide explains how to read chapters such as BCOBS, and the payment errors guide covers a bank's duties when a payment goes wrong.

What happens next

The updated guidance takes effect on 26/06/2026¹. No further implementation dates or transitional arrangements are set out in the chapter text.