Understanding Consumer Duty: A Comprehensive Guide for 2025
A guide to the Consumer Duty: the biggest shift in FCA expectations since Treating Customers Fairly, and how firms embed its requirements.
Michaela Clarke
Operations & Compliance Coordinator
Published 15 January 2025. Regulatory dates and requirements may have changed since.
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The Consumer Duty represents the most significant shift in FCA expectations since Treating Customers Fairly (TCF). Since its introduction in July 2023, firms across the UK financial services sector have been working to embed these new requirements into their operations.
What is Consumer Duty?
Consumer Duty is a new regulatory framework introduced by the Financial Conduct Authority (FCA) under Principle 12 (PRIN 2A). It sets higher and clearer standards of consumer protection, requiring firms to put their customers' needs first.
The Duty applies to most FCA-regulated firms and covers the entire customer journey, from product design to post-sale support. It is built around four Consumer Duty outcomes that firms must deliver and evidence.
The Duty rests on a new Consumer Principle, Principle 12: a firm must act to deliver good outcomes for retail customers. It sets a higher standard than Principles 6 and 7, which no longer apply where the Duty does. Three cross-cutting rules set out the behaviour expected: act in good faith, avoid causing foreseeable harm, and enable and support retail customers to pursue their financial objectives.
The Four Consumer Duty Outcomes
1. Products and Services
Products and services must be designed to meet the needs of customers in the target market and perform as firms have led customers to expect.
Key requirements:
- Conduct thorough target market assessments
- Test products with real consumers
- Monitor product performance against customer needs
- Take action when products don't deliver good outcomes
2. Price and Value
Customers must receive fair value - the price they pay should be reasonable compared to the benefits they receive.
Key requirements:
- Conduct regular value assessments
- Consider total price vs. benefits
- Identify and address poor value
- Document value assessment methodology
3. Consumer Understanding
Communications must help customers make informed decisions and prevent foreseeable harm.
Key requirements:
- Test communications with target customers
- Use plain language
- Highlight key information prominently
- Provide information at the right time
4. Consumer Support
Customers must receive appropriate support throughout their relationship with the firm.
Key requirements:
- Enable customers to act in their interests
- Make it easy to complain or switch
- Identify and support vulnerable customers
- Monitor customer service quality
Common Implementation Challenges
1. Evidence and Documentation
Challenge: Proving compliance requires significant evidence.
Solution: Implement structured MI frameworks capturing:
- Customer outcome data by segment
- Product testing results
- Value assessment methodology
- Complaints analysis by root cause
2. Vulnerable Customers
Challenge: Identifying and supporting customers in vulnerable circumstances.
Solution:
- Train frontline staff to recognise vulnerability indicators
- Implement the FCA's four drivers of vulnerability framework
- Create flexible policies for reasonable adjustments
- Track outcomes by vulnerability segment
3. Third-Party Oversight
Challenge: Firms remain responsible for third-party actions (e.g., outsourced customer service, distributors).
Solution:
- Include Consumer Duty requirements in contracts
- Monitor third-party performance metrics
- Conduct regular audits
- Establish clear escalation processes
Board Responsibilities
The FCA expects boards to:
- Understand the Duty and its implications
- Challenge management on implementation
- Approve target market assessments and value strategies
- Oversee outcomes monitoring
- Act on poor outcomes identified
Boards should receive regular MI on customer outcomes, segmented by product, channel, and demographic factors.
Next Steps for Your Firm
- Conduct a gap analysis against the four outcomes
- Review and enhance policies, procedures, and governance
- Implement outcome monitoring with board-level MI
- Train staff on practical application
- Test communications with target customers
- Review third-party arrangements for Consumer Duty compliance
How MEMA Can Help
Our Consumer Duty specialists can support you with:
- Gap assessments against FCA requirements
- Board papers and training for senior management
- MI framework design for outcomes monitoring
- Policy templates tailored to your business
- Value assessment methodologies
- FCA engagement support
Book a free consultation to discuss your Consumer Duty implementation.
About the Author
The MEMA Regulatory Team includes ex-FCA regulators and Big 4 consultants with deep expertise in Consumer Duty implementation across all FCA sectors.
This article is for general guidance only and does not constitute regulatory advice. Firms should seek independent legal and regulatory counsel for their specific circumstances.
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