The Consumer Duty regulation is the Financial Conduct Authority’s highest standard of consumer protection for UK financial services, requiring firms to actively deliver good outcomes for retail customers rather than simply avoiding misconduct. It took effect on 31 July 2023 for products and services still open to sale, and extended to closed or legacy products on 31 July 2024.1Financial Conduct Authority. PS22/9: A New Consumer Duty The rules replace the older “treating customers fairly” approach with something more demanding: firms must demonstrate that their products and services are producing positive results for the people using them, not just that fair processes were followed.
Which Firms Must Comply
The Duty covers every firm authorised under the Financial Services and Markets Act 2000 that plays a meaningful role in delivering outcomes for retail customers.2Financial Conduct Authority. FG22/5 Final Non-Handbook Guidance for Firms on the Consumer Duty That obviously includes banks, insurers, investment firms, and financial advisers who deal with customers directly. It also reaches further back into the supply chain. If a firm designs a product, sets its price, or shapes how it gets marketed, the Duty applies even when that firm never speaks to a customer.
Manufacturers and distributors must share information so each can meet its own obligations. Manufacturers are expected to tell distributors who the product is designed for, how it works, and the value it should provide. If a distributor spots a problem with how a product operates in practice, it must raise concerns with the manufacturer and, where appropriate, notify the FCA.3Financial Conduct Authority. Consumer Duty Information for Firms No firm in the chain can disclaim responsibility by pointing to whoever else holds the customer relationship.
“Retail customers” covers individuals and small businesses that fall outside the definition of professional or institutional investors. The products involved range across mortgages, credit cards, pensions, insurance policies, and investment products.
Where a distribution chain includes non-UK firms outside the FCA’s jurisdiction, the burden shifts onto the UK firm in that chain. The UK distributor must take all reasonable steps to understand the product, its target market, and the value it provides so that it reaches customers appropriately.3Financial Conduct Authority. Consumer Duty Information for Firms
Closed and Legacy Products
Since 31 July 2024, the Duty has also applied to products and services no longer open for sale or renewal.1Financial Conduct Authority. PS22/9: A New Consumer Duty This matters most for firms with large legacy books. The FCA expects firms to review closed products under the cross-cutting rules and the four outcomes, prioritising those with the highest risk of consumer harm. If a product was closed because it offered poor value compared to newer alternatives, that history is itself a red flag.
Firms can group similar closed products together for review and fold these assessments into existing review cycles. The reviews themselves still have to happen. The FCA has made clear that supervision of closed products is part of its everyday work on the Duty.4Financial Conduct Authority. Our Consumer Duty Focus Areas
Principle 12 and the Shift in Burden
At the heart of the framework sits Principle 12 of the FCA’s Principles for Businesses: firms must act to deliver good outcomes for retail customers.5Financial Conduct Authority. PRIN 2A The Consumer Duty For retail business, Principle 12 replaces Principle 6 (treating customers fairly) and Principle 7 (communicating clearly).
The practical change is in where the burden sits. Under the previous framework, the FCA typically needed to show a firm had acted unfairly. Under Principle 12, firms need to show they delivered good outcomes. If results for customers are poor, technical compliance with specific rules will not provide a defence.
The Three Cross-Cutting Rules
Beneath Principle 12 sit three behavioural standards in PRIN 2A.2 of the FCA Handbook that inform how firms should approach every part of their operations.6Financial Conduct Authority. PRIN 2A.2 Cross-Cutting Obligations
- Act in good faith. Firms must deal honestly and openly with retail customers, consistent with their reasonable expectations. When a firm discovers customers have suffered foreseeable harm from its actions or omissions, it must take appropriate steps to put things right, including providing redress where needed.
- Avoid causing foreseeable harm. This covers harm from both actions and failures to act, through a direct customer relationship or through a firm’s role in the distribution chain, even where another firm in the chain also contributed to the problem.
- Enable and support customers to pursue their financial objectives. That means designing products, communications, and support channels that genuinely work for the people using them, not just refraining from blocking them.
The FCA can intervene based on a firm’s failure to meet these behavioural standards even when no specific outcome rule was breached.
The Four Outcomes
The Duty sets expectations in four areas that together cover the full customer experience. These are where its requirements become most concrete and measurable.1Financial Conduct Authority. PS22/9: A New Consumer Duty
Products and Services
Every product or service must be designed to meet the needs of a defined target market. Firms cannot build a product and then work out who might buy it. They must identify the intended customer group, design the product to serve its needs and characteristics, and monitor on an ongoing basis whether it is reaching the right audience.7Financial Conduct Authority. Consumer Duty Implementation: Good Practice and Areas for Improvement If a product ends up with customers it was never designed for, that is the firm’s problem to fix. Manufacturers must inform distributors about the target market and intended value so everyone in the chain understands who should and should not be buying.
Price and Value
The price a customer pays must bear a reasonable relationship to the benefits they receive. This is not a mandate for the cheapest possible pricing. It requires firms to assess whether the total cost to consumers, including all fees, charges, and other costs over the lifetime of the relationship, represents fair value relative to what the product actually delivers.7Financial Conduct Authority. Consumer Duty Implementation: Good Practice and Areas for Improvement Firms must be able to explain their remuneration practices and show them to be proportionate.
Where distributors add their own charges, they must consider the cumulative impact on overall value. A product that offered fair value when the manufacturer priced it can stop offering fair value once distribution costs pile on top. If a product fails the fair value test, the firm must act: improve the value proposition or withdraw it from sale.
Consumer Understanding
Communications must be clear enough for customers in the target market to make informed decisions. Technical accuracy alone is not enough. Firms must test their messaging to confirm it is genuinely understood by the people receiving it, using methods such as surveys, experiments, and interviews. Firms with complex products face the steepest challenge here, because explaining a structured investment product in language a typical retail customer can act on takes real effort. Communications aimed at customers with characteristics of vulnerability demand particular care.
Consumer Support
Firms must provide support that meets customer needs without unreasonable barriers throughout the entire relationship. The FCA has been explicit: the level of service when a customer wants to complain, switch products, or leave must match the level of service they received when signing up. Removing “sludge practices” that make it difficult for customers to act in their own interests is a core expectation.7Financial Conduct Authority. Consumer Duty Implementation: Good Practice and Areas for Improvement
Vulnerable Customers
The Duty amplifies obligations that already existed for vulnerable customers. The FCA identifies four key drivers of vulnerability firms must account for when designing products, communicating, and monitoring outcomes:8Financial Conduct Authority. FG21/1 Guidance for Firms on the Fair Treatment of Vulnerable Customers
- Health: physical or mental health conditions that affect a person’s ability to manage their finances or make decisions about them.
- Life events: major changes such as bereavement, job loss, or relationship breakdown that create periods of heightened risk.
- Resilience: low financial or emotional capacity to absorb sudden expenses or income shocks.
- Capability: limited financial literacy or digital skills that make complex products or services harder to use.
The FCA treats vulnerability as a spectrum, not a fixed category. Any customer can become vulnerable at any point, and the risk increases where one or more of these drivers is present. Under the Duty, firms must go beyond average outcome data and specifically assess whether vulnerable customer groups are experiencing fair results. Fair value assessments and outcome monitoring must include tailored analysis for these customers. Staff training is expected to equip front-line employees to recognise vulnerability indicators and respond appropriately without asking customers to repeatedly disclose difficult personal circumstances.
Annual Board Report and Ongoing Monitoring
The FCA takes a data-led approach to supervising the Duty. Rather than periodic check-ins, firms must continuously monitor the outcomes their customers experience and produce an annual board report summarising the results. The deadline falls on 31 July each year.7Financial Conduct Authority. Consumer Duty Implementation: Good Practice and Areas for Improvement
The report is not a tick-box exercise. The firm’s board must review and approve it, confirm whether it is satisfied the firm complies with Principle 12 and the PRIN 2A rules, and assess whether the firm’s future business strategy remains consistent with the Duty’s obligations. Content should cover the results of outcome monitoring across the four outcomes, any identified risks, root cause analysis of problems, corrective actions taken or planned, and how the firm’s strategy aligns with delivering good outcomes going forward.
Firms that treat the board report as a compliance formality rather than a governance tool will struggle. The FCA expects boards to critically evaluate the data, not just sign off on a document prepared by the compliance team. Where monitoring reveals poor outcomes, the board is expected to act.
What Happens When Firms Fall Short
When the FCA finds firms falling short, it has a range of tools. At the supervisory end, the regulator can require changes to product design, pricing structures, or distribution arrangements. A common mechanism is the Section 166 skilled persons review, where the FCA commissions an independent expert to examine a firm’s compliance at the firm’s expense.9Financial Conduct Authority. Skilled Person Reviews These reviews can cost anywhere from tens of thousands to well over a million pounds depending on scope and complexity.
In more serious cases, the FCA can impose public censures and substantial fines calibrated to the scale of consumer harm. For firms used to the old regime, where enforcement typically followed clear rule breaches, the Duty’s outcome-focused approach lowers the bar for regulatory intervention. A firm does not need to break a specific rule to face scrutiny; consistently poor customer outcomes alone can trigger action.
One boundary worth noting. The Consumer Duty does not give individual customers a private right of action to sue firms for breaches. Enforcement sits with the FCA, not with the courts. Customers who suffer harm still have recourse through the Financial Ombudsman Service and the FCA’s complaints and redress mechanisms, but they cannot bring a civil claim based on a breach of Principle 12 or the PRIN 2A rules. The FCA considered this question during the Duty’s development and decided against it, though it has said the position will be kept under review.
The cross-cutting rules do require firms to provide redress where appropriate when they identify that customers have suffered foreseeable harm.6Financial Conduct Authority. PRIN 2A.2 Cross-Cutting Obligations So while customers cannot take legal action themselves for a Duty breach, firms that discover harm are expected to put things right proactively rather than wait for the regulator to intervene.