FCA Consumer Duty: compliance requirements

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.

Key differences from previous rules:

• Outcomes focus: You must proactively deliver good outcomes, not just avoid causing harm
• Evidence requirement: You must monitor, test, and evidence that customers are receiving good outcomes
• Distribution chain responsibility: All firms in the chain share responsibility, even if you don't have direct customer contact
• Vulnerability focus: You must specifically 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 dynamic. 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 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.

Practical steps:

• 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.

Practical steps:

• 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.

Practical steps:

• 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.

Practical steps:

• 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:

• Outcome monitoring results: Data and analysis on whether customers are receiving good outcomes
• Evidence of poor outcomes: Identification of any customer groups receiving poor outcomes
• Root cause analysis: Understanding of why poor outcomes occurred
• Actions taken: Steps to address identified issues
• Future strategy: How Consumer Duty will be embedded going forward

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.

Types of evidence to collect:

• Quantitative data: Complaints trends, claims acceptance rates, product usage patterns, cancellation rates, customer journey analytics
• Qualitative data: Customer feedback, mystery shopping, focus groups, call listening
• Comparative data: How your outcomes compare to market benchmarks
• Vulnerable customer data: Specific analysis of outcomes for vulnerable customers

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.

Who must comply

Distribution chain responsibilities

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

Manufacturers (product designers) must:

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

Distributors 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.

Implementation checklist

Use this checklist to assess your firm's Consumer Duty readiness:

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 to avoid:

• Treating it as a one-off project: Consumer Duty requires ongoing monitoring and continuous improvement
• Relying on existing TCF processes: Consumer Duty goes further - you must evidence outcomes, not just fair treatment
• Focusing only on retail-facing staff: All functions (product, pricing, IT, marketing) contribute to customer outcomes
• Ignoring the distribution chain: You are responsible even if you do not interact directly with end customers
• Waiting for problems: Proactive monitoring is required - do not wait for complaints or FCA findings

Signs you are getting it right:

• 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