How and who started the Sacrament of Reconciliation/Penance/Confession?
Answer: The early Christians had no idea of going to church to receive Sacraments, they were “church”, a community of believers who celebrated the festivities and mysteries which connected them with the Risen Lord Jesus. The Sacraments were and are concrete signs of this saving action of Jesus.
So an essential part of this saving action of Jesus is to forgive sins in the Church, this community of believers. Jesus told his followers to baptize in the name of the Father, the Son and the Holy Spirit. And, of course, the Holy Eucharist: “Take and eat this bread, for this is my body…”
After the Resurrection Jesus breathed on his disciples and said, “receive the Holy Spirit” and “If you forgive people’s sins they are forgiven and if you do not forgive them they are not forgiven.” (John 20:23)
Over the years and centuries the Church developed these saving signs or Sacraments of Christ nourishing his people and often they took different forms. In this sense then we can say the Sacraments were established by Jesus in the Church although with some of the Sacraments there was not a clear pattern of development until regulated by the Church many years down the road.
Thus in the Sacrament of your question – Penance/ Reconciliation /Confession – it actually took different forms and showed a variety of practices down through the centuries until today.