Understand how the Consumer Duty applies to credit products

The four outcomes and how they apply to credit

The Duty is built around four outcomes. Each has specific implications for how credit products are designed, priced, communicated, and supported.

Outcome 1: Products and services

You must design credit products that genuinely meet the needs of the customers they are intended for. This requires defining your target market with sufficient granularity.

What this means in practice:

• Target market definition: Not simply "anyone who applies". You must identify the characteristics, needs, and objectives of the customers the product is designed for, and the customers for whom it is not suitable.
• Product governance: Ongoing monitoring of whether the product is being distributed to the intended target market and whether it is performing as expected.
• Distribution strategy: If brokers distribute your products, you are responsible for ensuring they understand the target market and do not sell outside it.
• Performance review: Regular review of customer outcomes data (arrears rates, complaint volumes, FOS referral rates) to identify whether the product is causing harm.

Outcome 2: Price and value

The fair value assessment is arguably the most significant new obligation for credit providers. You must assess whether the total cost of credit represents fair value for the target market.

What "fair value" includes for credit:

• The interest rate and how it compares to the market
• Arrangement fees, administration fees, and any other charges
• Early repayment charges and their justification
• Default fees and charges
• The cost of any add-on products (payment protection, insurance)
• Commission paid to brokers and whether it creates conflicts of interest

Fair value is not the same as "cheapest". A higher-priced product may offer fair value if it serves a genuine customer need that cheaper alternatives do not meet. But a product that extracts excessive charges from customers who have limited alternatives is unlikely to represent fair value.

Broker commission: The FCA has specifically highlighted broker commission arrangements in consumer credit as a fair value concern. If commission structures incentivise brokers to recommend products that are more expensive for the customer, this is a potential Consumer Duty breach.

Outcome 3: Consumer understanding

Customers must be able to understand the key terms of their credit agreement and the consequences of their decisions. For credit products, this means clarity about:

• The APR and total amount repayable
• Monthly repayment amounts and how they may change
• What happens if they miss payments
• Their rights under the agreement (withdrawal, early settlement, complaints)
• The difference between promotional rates and standard rates

The Duty requires you to test whether your communications are actually understood, not just whether they are technically compliant. Pre-contract information (SECCI) may be legally complete but still fail the Consumer Duty test if customers do not engage with or understand it.

Testing understanding: The FCA expects firms to use consumer testing, outcome monitoring, and complaint analysis to evaluate whether customers genuinely understand their credit products. If a significant proportion of customers are surprised by charges or terms, your communications are not meeting the Duty standard.

Outcome 4: Consumer support

Borrowers must be able to access support easily, particularly when they experience financial difficulty. This outcome has particular force in consumer credit because of the harm that can result from poor support.

What the FCA expects:

• Accessible contact: Customers should be able to reach you as easily to raise a problem or complaint as they could to take out the product. If you offer online applications in minutes, you should not require customers to wait on hold for an hour to discuss arrears.
• Forbearance: CONC 7 already requires forbearance for customers in difficulty. The Duty raises the bar by requiring you to demonstrate that forbearance options are genuinely working to improve customer outcomes.
• Vulnerability: Support must be tailored to the needs of vulnerable customers, including those with mental health conditions, low financial capability, or experiencing major life events.
• Exit barriers: Customers should face no unreasonable barriers to switching, settling early, or closing their accounts.

The annual board report

The Consumer Duty requires your board (or equivalent governing body) to produce an annual report assessing whether the firm is delivering good outcomes for customers.

For credit products, the report should cover:

• Customer outcome data: arrears rates, default rates, complaint volumes, FOS outcomes, and persistently indebted customer numbers
• Fair value assessment results for each credit product
• Evidence of consumer understanding (or lack of it)
• Support effectiveness: how well forbearance and vulnerability processes are working
• Root cause analysis of any identified poor outcomes
• Remedial actions taken and their effectiveness

This is not a tick-box exercise. The FCA expects boards to engage meaningfully with the data and challenge management where outcomes are poor.

How the Duty interacts with CONC

The Consumer Duty is additional to, not a replacement for, existing CONC rules. Where CONC sets a specific requirement (such as the settlement statement deadline or the affordability assessment), you must still comply with it. But the Duty asks a broader question: are your customers getting good outcomes?

Examples of where the Duty goes beyond CONC:

• CONC requires affordability assessment; the Duty asks whether your lending is actually resulting in sustainable repayment outcomes
• CONC requires a settlement statement within 7 days; the Duty asks whether the overall settlement process is fair and accessible
• CONC requires complaints handling within 8 weeks; the Duty asks whether you are learning from complaints and improving outcomes

FCA supervisory priorities for 2025/26: The FCA has identified consumer credit as a priority area for Consumer Duty supervision. Multi-firm reviews are examining fair value assessments for credit products, broker commission disclosure, and debt collection practices. Firms should expect data requests and possible supervisory engagement.