Consumer Duty

A higher standard of consumer protection

The Consumer Duty is a set of rules and expectations introduced by the Financial Conduct Authority to raise the standard of care firms give retail customers across financial services. It came into force for new and existing products and services on 31 July 2023. At its heart is a single overarching principle: firms must act to deliver good outcomes for retail customers. That shifts the emphasis from simply following rules and disclosing information to taking responsibility for the outcomes customers actually experience.

The Duty is deliberately outcomes-focused rather than tick-box. A firm can follow the letter of a process and still fall short if the result for the customer is poor. This changes how firms are expected to design products, set prices, communicate and provide support, and how they evidence that they are doing right by their customers.

The four outcomes

The Duty is organised around four outcomes that firms must work towards. Together they cover the whole relationship, from how a product is designed and priced through to how a customer is communicated with and helped when something goes wrong.

These outcomes apply across the customer journey and the product lifecycle, not just at the point of sale. For a lender this means affordability at origination, fair treatment in collections and forbearance, clear explanations of cost such as APR, and accessible support when a customer struggles are all part of meeting the Duty.

• Products and services: designed to meet the needs of identified target customers
• Price and value: a reasonable relationship between price and the benefit received
• Consumer understanding: communications that equip customers to make good decisions
• Consumer support: support that meets customers' needs, including when they need help

What it means for lenders in practice

For lenders, the Consumer Duty reaches into almost every part of the operation. Products must be designed and targeted so they suit the customers who end up with them. Pricing must represent fair value, which is about the overall relationship between what the customer pays and what they receive, not simply being the cheapest. Communications, including credit advertising and the presentation of APR, must genuinely help customers understand what they are taking on. And support must be good enough that a customer in difficulty can get help without unreasonable barriers.

A central requirement is that firms avoid causing foreseeable harm. In lending, that includes not lending amounts customers cannot sustainably afford, not trapping people in products that no longer suit them, and treating customers in arrears with genuine forbearance. The Duty also expects firms to monitor the outcomes they are delivering and to act where they find customers, or particular groups such as vulnerable customers, are being let down. In short, the Consumer Duty asks firms to be able to show, with evidence, that their products, prices, communications and support are producing good outcomes, and to fix them when they are not.