The Consumer Duty is the UK Financial Conduct Authority (FCA)’s outcomes-based framework for retail customer protection. It requires firms to focus on whether customers receive good outcomes in practice, rather than simply whether technical regulatory requirements have been met. It is part of the FCA’s strategy for dealing with fast-moving developments, such as the use of artificial intelligence in financial services.
Since it first came into force on 31 July 2023, the Consumer Duty has, by the FCA’s own assessment, driven positive change. However, in some areas, financial services firms have applied the Consumer Duty more broadly and intensively than intended, particularly in wholesale markets and complex distribution chains (the networks of businesses involved in bringing a product to the end customer). In some cases, this is intentional, but in others, the approach adopted may reflect uncertainty about the scope of the Consumer Duty. In her 2025 Mansion House Speech, then Chancellor Rachel Reeves asked the FCA to review the Consumer Duty, in particular whether it unduly impacted wholesale markets. The wider context for this is the UK government’s economic growth agenda.
Earlier in 2026, the FCA published a consultation paper proposing targeted amendments to the Consumer Duty. With the consultation now closed, the FCA expects to finalise any new rules in early 2027.
What is the Consumer Duty?
In summary, the Consumer Duty requires businesses operating directly or indirectly in retail financial services to actively deliver good outcomes for customers. This means not only avoiding wrongdoing but also taking positive steps to ensure that products and services meet customers’ needs, offer fair value, are communicated clearly and are supported effectively throughout their lifecycle. The Consumer Duty applies across the entire distribution chain, meaning that businesses further ‘up the chain’ that are involved in designing, distributing, or administering retail financial products may fall within its requirements, even where they have no direct relationship with the end customer.
Why the Changes Are Being Proposed
The consultation recognises that the over-application of the Consumer Duty has generated unnecessary cost and uncertainty without meaningfully improving outcomes for retail customers. Firms have reported difficulty determining when the Consumer Duty applies to them, leading to excessive and potentially costly compliance activity. Some board reporting packs have become, in the FCA’s own words, “disproportionate.” The FCA’s aim is not to weaken consumer protection, but to ensure the rules are applied where actually relevant.
Overview of the Key Changes
The consultation proposes reforms across four broad areas:
- Narrowing the territorial scope. One of the more significant proposals is to limit the Consumer Duty to retail market business where the customer is usually resident in the UK. Currently, the Consumer Duty can apply to certain cross-border business with overseas customers, where other FCA conduct rules already apply to that business. The FCA recognises that this can create overlap with local rules in other countries. Under the proposed changes, subject to narrow exceptions (such as UK pensions and funeral plans), firms would only need to comply with the Consumer Duty in relation to UK-resident customers. However, if a firm discovers that products not intended for UK residents were in fact being taken up by UK residents, it would need to review whether the transactions comply with the Consumer Duty and, if needed, take appropriate steps to address the issue and prevent recurrence.
- Clearer scope. The consultation proposes a clearer framework for determining whether a firm’s activities fall within the scope of the Consumer Duty. Concepts and terms would be clarified, and it is proposed that a firm need not comply with a set of outcome rules where it performs no relevant role. For example, a firm with no part in preparing communications would not be subject to obligations concerning the consumer’s understanding of a financial product. A distinction is also proposed between “principal manufacturers” (those with substantive control over a product’s design or operation) and “secondary manufacturers,” which contribute to a product but do not actually control it. Secondary manufacturers would have less onerous obligations, focused on ensuring their contribution does not create material risks of harm. It is also proposed that certain specific activities fall out of scope of the Consumer Duty, including market making and providing indirect access to retail payment systems.
- Proportionate application across distribution chains. There has been concern that the Consumer Duty requires firms to monitor the conduct of other businesses in their distribution chain, including by notifying potential breaches of the Consumer Duty by other firms to the FCA. The consultation proposes making clear in the rules that each firm is responsible only for its own role and activities, unless regulation or contracts require oversight of others’ compliance. Where a firm has only a limited or indirect role in the distribution chain, a proportionate approach should be taken in applying the Consumer Duty. Firms would also be able to place reasonable reliance on information and representations provided by other firms in the chain, unless it would be unreasonable to do so in the circumstances. Whilst the notification requirement would remain, the FCA proposes clarifying that this only relates to material concerns about Consumer Duty compliance by other businesses in the chain.
- Streamlined governance and monitoring. Many firms currently produce extensive board reports and gather large volumes of data to demonstrate compliance with the Consumer Duty, some of which may add little practical insight. The consultation proposes that board reporting should be commensurate with a firm’s actual role and influence on customer outcomes. Similarly, information-gathering expectations would be re-calibrated so firms focus on data that helps them understand whether their activities support good customer outcomes, rather than collecting data simply to demonstrate Consumer Duty compliance.
Key Takeaways
For firms within scope of the Consumer Duty, the proposed changes may reduce compliance activity.
The FCA’s current estimate is to publish the policy statement and make any new rules in the first quarter of 2027. Before final rules are published, firms may want to consider whether their current Consumer Duty arrangements remain appropriately targeted or if adjustments are likely to be needed. If the latter, firms will then be ready to address any gaps in good time to ensure compliance with any new rules.
Firms may wish to consider the following points of practical significance before any changes are implemented:
- Identifying and recording whether customers are usually resident in the UK. If the proposals are implemented, firms may no longer need to apply Consumer Duty processes, such as communications testing or outcomes monitoring, to non-UK customer bases. However, they will need reliable systems to distinguish UK-resident from non-UK-resident customers.
- Mapping their role in the relevant distribution chain. The proposals reinforce that firms are accountable for their own activities, not for filling gaps left by others. Distributors, advisers and brokers should therefore identify where they have direct customer-facing responsibilities. They should also consider who else in the same chain they rely upon.
- Considering how they approach vulnerable customers. The proposed clarification does not remove responsibility for vulnerability, but it places emphasis on the firms closest to the consumer identifying individual needs, responding flexibly, monitoring complaints and outcomes, and escalating material issues upstream where appropriate.
- Assessing board reporting and monitoring data. The FCA’s message is that proportionality is key. Reporting should support genuine oversight, rather than create a tick-box record of compliance. Firms should consider whether management information is focused on the data that best demonstrates whether their own activities are delivering, or supporting, good customer outcomes.