What Is the Consumer Duty?

The Consumer Duty is part of the FCA’s Principles for Businesses, set out in PRIN 2A. It came into force on 31 July 2023 for products and services open to sale, and on 31 July 2024 for closed products. It applies to firms whose products and services are provided to retail customers, including firms in the distribution chain that don’t deal with customers directly.

The Duty has three parts:

The FCA’s Consumer Duty pages explain the rules and its supervisory findings in more detail.

The Four Consumer Duty Outcomes

Fair Value

The price and value outcome requires firms to assess whether their products provide fair value: whether the total price a customer pays is reasonable compared with the benefits they get. That includes fees, charges and interest, and the quality of the product and service. Fair value assessments should be repeated regularly, and should look at different groups of customers, because a product can offer fair value to most customers but poor value to some. Senior Managers responsible for products and pricing need to be able to show the assessments are real, and that the firm acts when they show a problem.

Vulnerable Customers

The Duty requires firms to consider the needs of customers with characteristics of vulnerability, and to deliver outcomes for them that are as good as for other customers. The FCA’s guidance on the fair treatment of vulnerable customers describes four drivers of vulnerability: health, life events, resilience and capability. Firms should:

• understand the vulnerabilities likely in their customer base
• train staff to recognise and respond to vulnerability
• design products, communications and services that work for vulnerable customers
• monitor outcomes for vulnerable customers specifically, not just in aggregate

Many firms train front-line staff using structured approaches such as the TEXAS model, a framework for handling disclosures of vulnerability: thanking the customer, explaining how the information will be used, getting explicit consent, asking appropriate questions and signposting to support. Whatever approach a firm uses, the board should see evidence of outcomes for vulnerable customers.

What the Duty Means for Senior Managers

The Board’s Annual Assessment

Each firm’s board, or equivalent governing body, must review and approve an assessment, at least annually, of whether the firm is delivering good outcomes for retail customers, and agree any action needed. It’s one of the clearest ways the regulator can see whether a board is engaged. A board that approves the report without challenge is exposed if outcomes later prove poor.

The Consumer Duty Board Champion

The FCA expected firms to appoint, where appropriate, a board-level champion, ideally a non-executive, to help keep the Duty on the board’s agenda. Our post on the Consumer Duty board champion explains the role and who should hold it.

Conduct Rule 6

The Duty added a new Individual Conduct Rule in COCON: “You must act to deliver good outcomes for retail customers.” Where an individual’s work relates to retail customers within the Duty’s scope, Rule 6 applies instead of Rule 4. It applies to almost everyone at a firm, not only Senior Managers. Our Conduct Rules training guide covers it in detail.

Where Accountability Sits

The Duty didn’t create a new Senior Manager Function. Accountability sits with the board and with the Senior Managers responsible for the relevant areas: products, pricing, communications, operations and customer service. Many firms have allocated an overall responsibility for the Duty to a specific Senior Manager. Our article on the Consumer Duty and the SMF framework explains how firms have approached this.

Consumer Duty Training

Training for the Duty should be tailored by role:

Common Weaknesses Found by the FCA

• Fair value assessments that don’t look at different customer groups, or that conclude everything is fine with little evidence.
• Management information that measures activity rather than outcomes.
• Annual board reports that describe processes without assessing outcomes, or that aren’t challenged.
• Vulnerable customers considered in policy but not in monitoring.
• Distribution chains where manufacturers and distributors don’t share the information each needs.

The People Behind the Duty

Delivering the Duty depends on people with specific skills: compliance officers who can design outcome monitoring, conduct risk specialists, product governance and pricing experts, and board members who can challenge outcome data. Demand for experienced compliance leaders has grown since the Duty came in. Our compliance officer recruitment service covers SMF16 appointments, and our chair and committee chair recruitment covers the board.

Frequently Asked Questions

What are the four Consumer Duty outcomes?

Products and services; price and value; consumer understanding; and consumer support.

What are the cross-cutting rules?

Firms must act in good faith towards retail customers, avoid causing foreseeable harm, and enable and support customers to pursue their financial objectives.

When did the Consumer Duty come into force?

31 July 2023 for open products and services, and 31 July 2024 for closed products.

Does the Consumer Duty create a new Senior Manager Function?

No. Accountability sits with the board and the Senior Managers responsible for the relevant areas.

What is Conduct Rule 6?

“You must act to deliver good outcomes for retail customers.” It applies to staff whose work relates to retail customers within the Duty’s scope.

Does the Duty apply to business with professional clients?

No. It applies to products and services for retail customers.