Comply with the FCA Consumer Duty

The Consumer Duty is the FCA's most significant conduct regulation in a generation. It requires FCA-authorised firms to act to deliver good outcomes for retail customers - a fundamental shift from the previous 'treating customers fairly' approach.

If your firm designs products, sets prices, communicates with customers, or provides customer support in the retail financial services market, you must comply with Consumer Duty. This includes firms anywhere in the distribution chain, not just those with direct customer relationships.

The Duty has applied in full, including to closed products, since 31 July 2024.

Who must comply

Distribution chain responsibilities

If you are part of a distribution chain (manufacturer, distributor, or retailer), you have specific responsibilities:

If you design products (a manufacturer), you must:

• Define the target market and distribution strategy
• Ensure the product provides fair value
• Share relevant information with distributors

If you distribute them, you must:

• Understand the target market from the manufacturer
• Only distribute to suitable customers
• Communicate appropriately for their role

You cannot outsource your Consumer Duty responsibilities. If you rely on a third party, you must have appropriate oversight arrangements.

What Consumer Duty means for your firm

Consumer Duty is not a tick-box compliance exercise. It requires a genuine culture shift towards putting customer outcomes at the centre of business decisions.

Compared with the previous rules:

• you must actively deliver good outcomes, not just avoid causing harm
• you must monitor, test and evidence that customers are getting good outcomes
• every firm in the distribution chain shares responsibility, even without direct customer contact
• you must consider the needs of vulnerable customers throughout

The FCA expects you to be able to demonstrate, with evidence, that your customers are receiving good outcomes. If you cannot do this, you are at risk of regulatory action.

Cross-cutting rules

Three overarching rules underpin everything you do under Consumer Duty. These apply across all your activities and interactions with retail customers:

Applying the cross-cutting rules in practice

Acting in good faith means being honest and transparent. Ask yourself: would a reasonable customer expect this? If you're relying on small print, complex terms, or customer inertia to make money, you may be failing this test.

Avoiding foreseeable harm is an ongoing task. You must actively monitor for emerging risks - through complaints data, customer feedback, industry intelligence, and FCA communications. You cannot claim harm was unforeseeable if the signs were there.

Enabling customers to pursue their financial objectives means making it as easy to leave, complain, or make a claim as it is to buy. If customers face more friction exiting than entering, you have a problem.

The four outcomes

Consumer Duty specifies four outcomes you must deliver. Meeting these outcomes is necessary but not sufficient - the Consumer Principle and cross-cutting rules may require more.

Products and services outcome

Every product or service must have a clearly defined target market. This is not a vague description - you must identify the customers who would benefit from the product, and those for whom it would be unsuitable.

In practice:

• Document your target market with specific characteristics (needs, financial situation, knowledge level)
• Identify negative target markets (customers for whom this product would be harmful)
• Review products regularly to check they still meet the needs of their target market
• Consider how distribution channels affect who actually buys the product

If a product is reaching customers outside its target market, or causing harm to customers within it, you must take action.

Price and value outcome

The price must provide fair value to the customer - this means the total benefit to the customer must be proportionate to the total cost. This applies to the overall price, not just individual fees.

In practice:

• Document your value assessment for each product
• Consider all costs (explicit fees, spread costs, exit charges, renewal increases)
• Assess whether vulnerable customers pay more or receive less value
• Compare value to similar products in the market
• Check for any 'loyalty penalties' where existing customers pay more than new ones

If you cannot clearly articulate why your pricing represents fair value, it probably does not.

Consumer understanding outcome

Your communications must enable customers to understand the product, make informed decisions, and know how to use it. This is not just about disclosure - customers must actually understand.

In practice:

• Test communications with representative customer groups
• Use plain English and avoid jargon
• Highlight key information at the point it matters (not buried in terms)
• Consider the channel and timing of communications
• Ensure communications are accessible to customers with different needs

The test is whether customers actually understand, not whether you disclosed the information somewhere.

Consumer support outcome

Customers must be able to realise the benefits of the product through appropriate support. There must be no unreasonable barriers to changing products, switching providers, or making claims.

In practice:

• Make it as easy to exit or complain as it is to buy
• Provide support through channels that work for your customer base
• Track and reduce friction points in the customer journey
• Ensure vulnerable customers receive appropriate support
• Do not use customer support as a 'sales prevention' mechanism

If it takes 10 minutes to buy but 45 minutes to cancel, you are failing this outcome.

Governance and accountability

Your board (or equivalent governing body) has ultimate accountability for Consumer Duty compliance. This cannot be delegated away.

Annual Consumer Duty report

Your board must receive and consider an annual report on Consumer Duty. This report should include:

• data and analysis on whether customers are getting good outcomes
• any customer groups getting poor outcomes
• why those poor outcomes happened
• what you have done to fix them
• how you will embed the Duty from here

The FCA may ask to see this report. It is evidence of your board's engagement with Consumer Duty.

Monitoring and evidencing outcomes

You must proactively monitor whether customers are receiving good outcomes. Waiting for complaints is not enough.

Collect numbers such as complaints trends, claims acceptance rates, product usage, cancellation rates and customer journey analytics, alongside customer feedback, mystery shopping, focus groups and call listening. Compare your outcomes with market benchmarks, and analyse outcomes for vulnerable customers separately.

The FCA expects you to understand your data, identify trends, and take action where outcomes are poor. You should be able to articulate what good outcomes look like for your products, and evidence that you are delivering them.

Implementation checklist

Assess your firm's Consumer Duty readiness against each of these:

Enforcement and consequences

The FCA has made clear that Consumer Duty is a priority enforcement area. Firms that fail to comply face significant consequences:

Getting it right

Common pitfalls are treating the Duty as a one-off project rather than ongoing monitoring; relying on existing 'treating customers fairly' processes when you must now evidence outcomes; focusing only on customer-facing staff when product, pricing, IT and marketing all affect outcomes; forgetting you are responsible even without direct contact with end customers; and waiting for complaints or FCA findings instead of monitoring proactively.

You are likely getting it right when:

• Customer outcomes data is discussed at board level
• Product and pricing decisions explicitly consider customer value
• Complaints and feedback lead to genuine changes
• Staff understand how their role affects customer outcomes
• You can articulate what good outcomes look like for each product