The Financial Conduct Authority’s (FCA) new Consumer Duty represents one of the most significant regulatory shifts in UK retail financial services in recent years. It is designed to raise standards of consumer protection and drive cultural change across the sector.
For compliance professionals, understanding and embedding the Duty is now central to regulatory strategy. This article outlines the Duty’s key elements, the expectations it creates, and practical implications for compliance teams.
Why the Consumer Duty?
The FCA has long sought to improve consumer outcomes. Previous initiatives, such as Treating Customers Fairly (TCF) and the introduction of the Senior Managers and Certification Regime (SMCR), laid foundations for higher standards.
However, persistent issues—such as complex product design, opaque charging structures, inadequate communications, and poor customer support—have continued to harm consumers. The FCA’s supervisory work and research highlighted that too many retail customers were not receiving fair value, or were struggling to understand and use financial products.
The Consumer Duty aims to address this by shifting the regulatory lens from processes to outcomes. Firms are now required not just to treat customers fairly, but to actively deliver good outcomes and prove they are doing so.
The Framework: Principles, Outcomes and Rules
The Duty comprises three interlocking layers:
1. The Consumer Principle
A new overarching Principle 12 has been added to the FCA Handbook:
“A firm must act to deliver good outcomes for retail customers.”
This principle sets a higher standard than the existing Principles 6 and 7 (fair treatment of customers and clear communications). It is explicitly outcomes-focused.
2. The Cross-Cutting Rules
Three cross-cutting rules set behavioural expectations:
- Act in good faith towards retail customers.
- Avoid causing foreseeable harm to retail customers.
- Enable and support customers to pursue their financial objectives.
These rules apply across all customer interactions, embedding fairness, foresight, and support into firms’ culture and operations.
3. The Four Outcomes
The Duty crystallises expectations into four outcomes, which firms must be able to evidence:
- Products and Services – Products must be designed to meet the needs, characteristics, and objectives of target markets, and distributed appropriately.
- Price and Value – The total price of products must represent fair value, considering benefits and costs. Excessive or hidden charges are unacceptable.
- Consumer Understanding – Communications must equip customers to make effective, informed decisions. This goes beyond clarity to ensure real understanding.
- Consumer Support – Customer service must enable consumers to realise the benefits of products without undue friction. Firms should not exploit inertia or barriers.
Scope and Timing
The Duty applies to all retail customers in financial services, covering products offered to individuals, small businesses, and SMEs where appropriate. It captures both manufacturers (product designers) and distributors (intermediaries and platforms).
Key implementation milestones were:
- 31 July 2023 – Duty in force for new and existing open products.
- 31 July 2024 – Extension to closed products.
By now, all firms should have completed their initial implementation work. However, the FCA has made clear that this is not a “one and done” exercise—the Duty represents an ongoing shift in how firms operate.
The FCA’s Expectations
The FCA expects the Duty to drive:
- Cultural change – A consumer-outcomes mindset embedded from Board level to front-line staff.
- Data-driven oversight – Firms must proactively monitor, assess, and evidence outcomes, not just compliance with process.
- Accountability – Senior managers, under SMCR, must take clear responsibility for delivery of the Duty. The FCA requires a Consumer Duty Champion at Board level to ensure focus and challenge.
- Proactive interventions – Firms should identify and fix issues before they harm consumers, rather than waiting for complaints or regulatory intervention.
Practical Implications for Compliance Teams
Compliance professionals face both challenges and opportunities under the Duty. Key areas of focus include:
1. Governance and Oversight
Boards and senior management must own responsibility for delivering outcomes. Compliance teams should ensure:
- A named Board-level Consumer Duty Champion is in place.
- Duty considerations are integrated into strategic decision-making.
- Regular reporting on customer outcomes is embedded in governance structures.
2. Product Governance
Firms must demonstrate robust product governance processes:
- Clearly defined target markets.
- Evidence that products deliver benefits commensurate with their price.
- Distribution channels aligned with customer needs.
Compliance must review product approval and review processes to ensure they reflect Duty standards.
3. Management Information (MI) and Data
The FCA expects firms to evidence outcomes. This requires data capture and analysis well beyond traditional compliance metrics. Examples of useful MI include:
- Customer comprehension testing of communications.
- Monitoring of customer drop-out rates in digital journeys.
- Analysis of complaints and call waiting times.
- Product usage patterns versus intended design.
Compliance must work closely with data teams to develop outcome-focused MI dashboards.
4. Consumer Communications
Compliance review of communications must evolve. The focus is no longer just on regulatory disclosure but on customer understanding.
- Testing with representative customers is critical.
- Firms must adapt communications to the needs of vulnerable customers.
- Plain English and behavioural insights should shape content.
5. Fair Value Assessments
Perhaps the most challenging aspect is evidencing fair value. Compliance professionals need to ensure methodologies are robust and consistent across product lines.
- Firms must consider total costs, including fees, interest, and non-monetary charges.
- Benchmarking against market norms is necessary, but insufficient on its own.
- Value assessments must be documented and periodically reviewed.
6. Vulnerable Customers
The Duty aligns with the FCA’s focus on vulnerability. Firms must:
- Identify vulnerable customers within their customer base.
- Tailor communications and support accordingly.
- Monitor outcomes to ensure vulnerable groups are not disadvantaged.
7. Training and Culture
Embedding the Duty requires widespread training. Compliance teams should support:
- Staff education on the Duty’s principles and practical implications.
- Scenario-based training to help staff recognise and respond to risks.
- Ongoing reinforcement through performance management and incentives.
FCA Supervision and Enforcement
The FCA has committed to a proportionate but assertive supervisory approach. In practice, this means:
- Proactive engagement – The FCA will ask for evidence of how firms are delivering outcomes.
- Thematic reviews – Sector-wide assessments of areas such as fair value or customer understanding.
- Intervention powers – The FCA will not hesitate to require product withdrawal, redress, or other remedial actions.
Early supervisory work has already focused on fair value assessments, treatment of closed products, and communications testing. Compliance professionals should expect scrutiny to intensify as the regime matures.
Strategic Opportunities
While challenging, the Duty also presents opportunities for firms and compliance teams:
- Competitive differentiation – Firms that genuinely deliver better outcomes may strengthen customer trust and loyalty.
- Better MI – Outcome-focused data can improve strategic decision-making.
- Enhanced governance – The Duty reinforces alignment between customer-centric culture and regulatory compliance.
For compliance professionals, positioning the function as an enabler of consumer-centric business strategy—rather than just a control function—can elevate influence and value within the firm.
Conclusion
The FCA’s Consumer Duty marks a step-change in UK financial services regulation. For compliance professionals, it demands more than technical compliance. It requires cultural leadership, rigorous oversight, and continuous focus on consumer outcomes.
Key takeaways:
- The Duty is outcomes-based, built around a new principle, cross-cutting rules, and four outcomes.
- Boards and senior managers carry explicit accountability for delivery.
- Compliance functions must adapt processes to focus on outcomes, evidence, and culture.
- Data and MI are central to evidencing compliance.
- The Duty is an ongoing journey, not a one-off implementation project.
Ultimately, firms that embrace the Duty not just as a regulatory burden, but as a framework for building trust and long-term customer relationships, will be best placed to succeed.
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