What is FCA Consumer Duty?
FCA Consumer Duty (Policy Statement PS22/9) is the most significant reform to FCA conduct regulation in over a decade. It came into force on 31 July 2023 for open book products and services, and on 31 July 2024 for closed book (legacy) products. It applies to all FCA-authorised firms that have a material influence on retail customer outcomes — whether you are a manufacturer (product originator), distributor (adviser, broker, platform), or both.
The duty is codified in PRIN 2A of the FCA Handbook. The headline obligation is simple: firms must act to deliver good outcomes for retail customers. But the regulatory machinery behind that headline is substantial.
The Consumer Principle (PRIN 12)
Consumer Duty sits alongside and reinforces the existing principles. PRIN 12 states: "A firm must act to deliver good outcomes for retail customers." This is an outcomes-based standard — the FCA is not prescribing a tick-box process. It is asking firms to demonstrate, through evidence, that retail customers are actually getting good outcomes across four defined areas.
Critically, PRIN 12 applies throughout the product lifecycle, not just at point of sale. A firm cannot implement Consumer Duty once and consider itself done.
The Four Outcomes (PRIN 2A.3–2A.6)
1. Products and Services (PRIN 2A.3)
Firms must ensure products and services are designed to meet the needs, characteristics, and objectives of an identified target market. This applies at the design stage and requires ongoing monitoring after launch.
Key obligations include: documented target market definition (risk profile, financial resilience, needs and objectives); product governance that includes Consumer Duty assessment; post-launch outcome testing; and assessment of products with features that could cause foreseeable harm — such as auto-renewal at higher price, cliff-edge interest rate changes, or excessive penalty charges.
Closed book products: Firms were required to assess legacy products (sold before 31 July 2023) by 31 July 2024. Any products found to be causing poor outcomes require a remediation plan.
2. Price and Value (PRIN 2A.4)
The price and value outcome requires firms to assess whether the price a retail customer pays for a product or service is reasonable relative to the overall benefits provided. This is not simply a pricing cap — it is a proportionality test.
A fair value assessment must consider: the benefits of the product relative to its total price; whether any characteristics of the target market (e.g. vulnerability, low financial resilience) affect the assessment; whether the firm's distribution strategy is consistent with delivering fair value; and whether cross-subsidisation from add-on products undermines value.
For firms in a distribution chain, PRIN 2A.4.13R–14R require manufacturers and distributors to share fair value information. Distributors must obtain sufficient information from manufacturers to assess whether the end-to-end price is fair. Commercial arrangements between manufacturer and distributor must not compromise customer value.
GI and protection firms: FCA PS21/5 (pricing practices) prohibits dual pricing (new vs. renewal price discrimination) for general insurance and protection products. Consumer Duty reinforces this requirement.
Value assessments must be reviewed at least annually, or whenever there is a material change to the product, cost base, or market.
3. Consumer Understanding (PRIN 2A.5)
This outcome goes beyond the existing "fair, clear and not misleading" financial promotion standard. Consumer Duty sets a higher bar: firms must ensure that real customers actually understand the information they receive, not merely that the information was technically provided.
This means consumer comprehension testing is now expected — user research, A/B testing of communications, mystery shopping, or analysis of customer queries and complaints as a proxy for confusion.
Key areas of FCA focus based on multi-firm reviews include:
- Savings notifications: FCA found firms were sending renewal/rate-change notifications that customers did not understand or notice. Timing, format, and clarity matter.
- Digital dark patterns: Pre-ticked boxes, misleading defaults, asymmetric friction (easy to sign up, hard to cancel) are all under scrutiny. The FCA's online communications guidance explicitly addresses these.
- Jargon and small print: Key risks, costs, and features must be surfaced prominently — not buried in lengthy T&Cs or disclosed only at an inconvenient moment in the customer journey.
Vulnerable customers (FG21/1): The consumer understanding outcome intersects directly with the FCA's vulnerable customer guidance. Firms must identify customers with vulnerability characteristics — health (physical or mental), life events (bereavement, job loss, relationship breakdown), financial resilience (over-indebtedness, low savings buffer), and capability (low financial literacy, poor numeracy). Communications and support must be adapted for these customers.
4. Consumer Support (PRIN 2A.6)
The fourth outcome requires that firms provide support that meets customers' needs throughout their relationship. This covers: accessibility of contact channels; responsiveness (wait times, abandonment rates, resolution times); ease of switching or cancellation; treatment of financially vulnerable customers (forbearance, signposting to free debt advice); and the claims or benefit-realisation process for insurance and investment products.
A particularly important area: exit friction. The FCA is clear that cancellation must be as easy as sign-up. Subscription firms that make cancellation deliberately difficult face significant Consumer Duty risk.
For insurance firms, claims outcomes are a key fair value indicator. Low claims acceptance rates relative to premium volume are a red flag that the FCA expects firms to monitor and justify.
Governance and Board Accountability (PRIN 2A.2 / SM&CR)
Board attestation (PRIN 2A.2.18R)
Consumer Duty is not just for compliance teams. The board (or equivalent governing body) must formally attest at least annually that the firm is delivering good outcomes for retail customers. This annual board report must include monitoring data and customer outcome testing results, and the board must show evidence that it has scrutinised this data — not just received a summary.
The first annual board reports were due by 31 July 2024. They are now a standing regulatory obligation.
SM&CR Consumer Duty champion
Firms should designate a senior manager (SMF) as Consumer Duty champion at board level. This person is individually accountable under the Senior Managers and Certification Regime (SM&CR) for Consumer Duty delivery. Responsibilities must be documented in the SMF's statement of responsibilities.
Management information (MI)
Consumer Duty requires a structured MI framework producing data across all four outcomes. The FCA is explicit that data should be broken down by product, channel, and customer segment. MI should feed the annual board report and trigger escalation when outcome indicators deteriorate.
Distribution Chains and Third Parties
Consumer Duty applies across the full distribution chain. Manufacturers must provide distributors with the information they need to meet the duty. Distributors must pass customer feedback and outcome data upstream. Contractual arrangements must be updated to reflect these obligations.
Where firms use third-party service providers (outsourcers, technology vendors, embedded finance providers), they cannot outsource accountability for Consumer Duty outcomes. Due diligence and ongoing monitoring of third-party performance against Consumer Duty standards is required.
FCA Enforcement and Supervisory Approach
The FCA has been clear that Consumer Duty is an enforcement priority. Tools available include:
- Financial penalties under s.66A FSMA
- Business restriction or variation of permissions
- Public censure (published Final Notices)
- SUP 15.3 notifications triggered where Consumer Duty breaches cause or risk causing significant harm
- Portfolio letters and multi-firm reviews — the FCA uses targeted reviews to benchmark firms and identify sector-wide issues
The FCA's supervisory expectation is that firms can demonstrate — with evidence — that they are delivering good outcomes. A firm that cannot produce outcome testing data, fair value assessments, or board attestation evidence is, by definition, not Consumer Duty compliant.
Common Consumer Duty Gaps (from FCA Multi-Firm Reviews)
- Fair value assessments completed as a one-off exercise, not embedded in ongoing product governance
- Consumer understanding treated as a communications drafting exercise rather than a comprehension-testing programme
- Vulnerable customer identification limited to call centre scripts — no systematic data approach
- MI frameworks producing data on inputs (policies in place, complaints received) rather than outcomes (did customers achieve their financial objectives?)
- Board attestation sign-off without board members demonstrating genuine scrutiny of outcome data
- Distributor / manufacturer information sharing not operationalised — contractual obligations exist but data is not actually being shared
- Closed book / legacy products assessed and found to be causing poor outcomes but remediation plan not implemented
Where to Start: Practical Steps
- Gap assessment: Use a structured checklist across all four outcomes plus governance. Identify critical gaps vs. enhancements needed.
- Fair value assessments: Complete for all in-scope products. Involve pricing, product, and legal teams. Document the methodology and results.
- Consumer comprehension testing: Design a testing programme appropriate for your scale. Even a structured review of complaint themes and customer service queries is a start.
- Board report preparation: Agree the MI data set needed for the annual board attestation. Build the data collection process now, not the month before the report is due.
- Vulnerable customer programme: Review FCA FG21/1. Implement identification, data, and adaptation processes across all customer touchpoints.
Use the ComplyKit FCA Consumer Duty Compliance Checklist to run a 42-item gap assessment across all four outcomes, governance, and monitoring — and generate a tailored compliance report for your firm in minutes.