The Consumer Duty: what it means for you

The Consumer Duty is a set of rules from the Financial Conduct Authority (FCA) that requires financial firms to act to deliver good outcomes for their retail customers. It came into force on 31 July 2023 for open products, and it replaced the older, less demanding standard of "Treating Customers Fairly" with something the FCA describes as higher and more exacting¹.

In practice, the Duty touches almost every financial product a household uses: bank accounts, credit cards, loans, mortgages, insurance, pensions and investments. It applies across all of a firm's regulated activities, from high-level strategic planning down to individual customer interactions⁵. It covers products and services, and it protects not only existing customers but prospective ones too: the definition of a retail customer includes someone who is only considering a product².

What the Consumer Duty is and who it protects

The FCA introduced the Consumer Duty to give consumers a higher level of protection and to ensure firms focus on consumer needs³. It sits in the FCA Handbook as Principle 12 for Business, with the detailed expected standards set out in PRIN 2A⁵. The core rule is short enough to quote in full:

The Duty is outcomes-based rather than process-heavy: what matters is the result for the customer, and the evidence a firm needs to show it is proportionate to the firm's scale and complexity¹. It imposes a higher and more exacting standard of conduct than the previous Principles 6 and 7 required, and it applies more broadly². Indeed, where the Consumer Duty applies, Principles 6 and 7 no longer apply at all².

Who counts as protected is drawn widely. A "retail customer" for the purposes of the Duty includes a prospective customer, so a firm must treat you properly even while you are only shopping around². A "product" includes both products and services, so the Duty reaches a current account, an insurance policy and an ongoing advice relationship alike². The Duty applies across all of a firm's regulated activities, from decisions made at board level to a single phone call with a customer⁵.

The Duty sits alongside other consumer protection law rather than replacing it. The Consumer Rights Act 2015, for example, separately requires that written terms of a consumer contract be transparent, and the unfair terms rules in Part 2 of that Act continue to apply to financial contracts⁶. The wider framework of UK consumer protection is covered in consumer protection in UK financial services.

One principle, three rules and four outcomes

The Consumer Duty is built from three layers. At the top is the consumer principle: "A firm must act to deliver good outcomes for retail customers"¹. Beneath it sit three cross-cutting rules that explain how firms should act to deliver those outcomes: act in good faith toward retail customers; avoid causing foreseeable harm to retail customers; and enable and support retail customers to pursue their financial objectives⁵. At the base are four outcomes, which set more detailed expectations for firm conduct in the areas that matter most to customers¹.

The four outcomes are: products and services; price and value; consumer understanding; and consumer support⁵. They cover the governance of products and services, price and value, consumer understanding, and consumer support³. Each is a suite of rules and guidance in its own right, and the rest of this page takes the three that most affect everyday customers in turn: price and value, understanding, and support.

The cross-cutting rules are what make the outcomes bite. A firm that designs a product properly but then sells it in a way that causes foreseeable harm is still in breach, because the rules apply across the whole relationship, not just at the point of sale. The Financial Ombudsman Service, which decides complaints, has described the Duty as setting a higher standard of care for consumers than firms were previously held to³.

Price and value: firms must show you get fair value

The price and value outcome is the part of the Duty most often quoted, and it is the one that touches the money in your pocket. Fair value assessments are intended to ensure firms properly consider fair value in their decision-making about the products and services they offer or provide to retail customers¹. A firm that manufactures products must ensure its products provide fair value to retail customers in the target markets for those products, and must carry out a value assessment, reviewing it on a regular basis appropriate to the nature and duration of the product².

Fair value does not mean the cheapest price. It means the relationship between what you pay, in total, and what you get: the benefits of the product, the quality of the service behind it, and what a reasonable customer in the target market would expect. The FCA's view of charges in the mortgage market shows how the principle is applied: charges imposed by a firm on customers must be transparent, and unfair or excessive charges are inconsistent with the Consumer Duty⁷.

The same idea runs through specific product rules:

• Insurance firms must provide price information in a way calculated to enable the customer to relate it to a regular budget⁸.
• Mortgage lenders must treat customers fairly and act in accordance with the Consumer Duty by assessing whether the customer will be able to repay the sums borrowed and the interest⁹.
• The FCA's work on overdrafts, store cards, catalogue credit, home-collected loans and rent-to-own services applies Principle 6, that a firm must pay due regard to the interests of its customers and treat them fairly, alongside the Duty¹⁰.

There is a limit to what fair value means in a dispute. Under the "fair and reasonable" test that applies to the Financial Ombudsman Service, for any element of a complaint where a firm has met its obligations under relevant FCA rules, the ombudsman is required to find that the firm acted fairly and reasonably in relation to that element¹¹. In other words, a firm that can show it met the Duty's requirements on price and value has a defence on that point.

The Duty's reach into payments has been debated. The Financial Services Consumer Panel has argued that the consumer duty should unambiguously apply to payment firms¹². For a customer, the practical position is that the Duty applies to the regulated activities of FCA-authorised firms, so the products and services a payments firm provides under an FCA authorisation fall within it.

Clear information you can understand

The consumer understanding outcome requires that information a firm gives you is clear, timely and accessible, without jargon or misleading terms¹. Consumer understanding is an outcome under the Consumer Duty in its own right¹³, which means a firm cannot treat its letters, websites and app messages as an afterthought: how well you understand a product is part of what the firm is judged on.

This builds on rules that already existed. The Consumer Rights Act 2015 requires that a trader must ensure a written term of a consumer contract, or a consumer notice in writing, is transparent⁶. In credit, firms dealing with customers in financial difficulty must ensure the customer has an appropriate level of information about the options available to them, in good time and in an understandable format, so the customer can make an informed decision¹⁴. Firms should also take reasonable steps to make customers aware of, and help them understand, the support available to them if they experience financial difficulty, and make it easy for those customers to contact the firm¹⁴.

Specific product rules carry the same expectation:

• Payment account providers must make available to consumers, free of charge, accessible information and assistance about the specific features of the account and the associated fees and conditions of use¹⁵.
• Debt collectors and debt purchasers are reminded of their obligations under the Consumer Duty, and in particular the consumer understanding outcome¹⁶.
• Consumers are entitled to be told when their debt is assigned, that is, sold on to another firm¹⁷.

The FCA has published good and poor practice in this area, and its guidance is that firms should test whether customers genuinely understand what they are being told, rather than simply sending the required documents¹³. For a customer, the practical test is simple: if a firm's explanation of its own fees left you unable to work out what you would pay, that is the kind of thing the consumer understanding outcome is aimed at.

Support while you use a product, including if you are vulnerable

The fourth outcome, consumer support, concerns what happens after you buy. The cross-cutting rules require firms to enable and support retail customers to pursue their financial objectives⁵, and the support outcome sets detailed expectations for how firms do that: post-sale service, handling queries and complaints, and making it easy to switch or cancel.

Vulnerability is central to this outcome. Any consumer can become vulnerable at any time in their life, for example through serious illness, bereavement or loss of income¹⁸. Consumer protection law recognises that a group of consumers may be vulnerable as a result of their age, their physical or mental health, their credulity, or the circumstances they are in¹⁹. In credit, firms should have regard to information indicating a customer is in, has recently experienced, or is likely to experience financial difficulties, or is vulnerable, for example because of mental health difficulties or mental capacity limitations²⁰. Customers who have mental health difficulties or mental capacity limitations may fall into the category of vulnerable customers²¹.

What firms should do about it is set out in guidance and policy:

• Vulnerable customers will be provided with support suited to their specific vulnerability¹⁸.
• Insurance rules make it easier for consumers to cancel automatic renewal, to support the Consumer Duty's requirement to avoid causing foreseeable harm and the expectation that consumers do not face unreasonable barriers when they want to switch²².
• Firms dealing with customers under regulated deferred payment credit agreements should pay due regard to their obligations under the Consumer Duty²³.
• A new Money and Pensions Service toolkit aims to help creditors better support customers experiencing vulnerability, mental health challenges or economic abuse²⁴.
• Where a firm is informed, or reasonably ought to know, about a change in a customer's circumstances that could affect their eligibility to claim benefits under an insurance policy, the firm should inform the customer of the potential impact in good time²⁵.

For a customer, the support outcome means a firm is expected to notice when your circumstances change and respond to it, rather than treating every account as identical. If you tell a firm you are unwell, grieving or losing income, the Duty expects that to change how the firm deals with you.

Help if you are struggling with repayments

The Duty's support expectations are at their most specific when you cannot pay. Firms should take reasonable steps to make customers aware of, and help them understand, the support available to them if they experience financial difficulty, and to enable those customers to easily contact the firm¹⁴. Firms must also give the customer an appropriate level of information about the options available, in good time and in an understandable format, so the customer can make an informed decision¹⁴.

What firms may do if you do not pay varies by product, and knowing the sequence helps. A water company, for example, may send a reminder notice, telephone you to request payment, pass your debt to a debt recovery agent, and take you to court as a last resort²⁶. Water companies are also expected, under the Paying Fair guidelines, to offer customers access to holistic debt advice to help them maximise their incomes, particularly at the first indication that a customer is struggling to pay, with the customer's consent for their details to be passed to the organisation²⁷.

Debt advice itself is free from independent sources. The FSCS points customers who are having trouble repaying money they owe to free debt advice from organisations including StepChange, Which? and Citizens Advice¹⁴. If you have an overpayment of New Style Jobseeker's Allowance to repay, you contact Debt Management to make a repayment²⁸.

Two further points of law are worth knowing. Consumers are entitled to be told when their debt is assigned to another firm¹⁷. And in Scotland, a statute barred debt ceases to exist and is no longer recoverable if a relevant claim has not been made and the debt has not been acknowledged during the relevant limitation period; it is misleading for a firm to suggest you may face court action for a statute barred debt when the limitation period has expired. The wider picture of debt help and your rights is in debt: a complete guide.

Where the Consumer Duty does not apply

The Duty has edges, and it is worth knowing where they are.

• It is not retrospective. The Duty does not have a retrospective effect and will not apply to past actions by firms³. It cannot be used to challenge conduct that happened before 31 July 2023.
• Closed products have their own provisions. There are particular provisions concerning closed products and existing products distributed to retail customers before 31 July 2023². Older products are not simply abandoned, but the rules that apply to them differ from those for open products.
• It does not create an advice duty. The Duty does not create a fiduciary relationship where one would not otherwise exist, and it does not require a firm to provide advice or carry out any other regulated activity it would not otherwise have carried out².
• It applies to FCA-regulated activities. The Duty covers the regulated activities of FCA-authorised firms⁵. Products and firms outside the FCA's perimeter are covered by other law instead, such as the Consumer Rights Act 2015, whose unfair terms rules do not apply to terms reflecting mandatory statutory or regulatory provisions⁶.
• Some exceptions protect the vulnerable. In payment scams policy, the consumer standard of caution exception does not apply to vulnerable consumers²⁹, meaning a vulnerable customer is not penalised in the way others might be for missing warning signs.

Not every rule change engages the Duty at all: some Scottish regulations stated that a consumer duty assessment was not required because the regulations would not have an impact on consumers³⁰. The general point for a consumer is that the Duty is a powerful standard, but it is not the only protection you have, and it does not reach everything.

Complaining when a firm falls short

If you think a firm has fallen short of the Duty, the route starts with the firm itself. Consumers may choose to complain to the firm and seek redress from it, and refer the complaint to the Financial Ombudsman Service if the firm does not satisfy the complaint and it is appropriate to do so³¹.

The deadlines a firm must meet depend on the type of complaint. If your complaint is about a card payment or a direct debit, the business must look into things and get back to you within 15 days. If the complaint does not involve a payment from your account, the business has eight weeks to respond³². If the firm misses the deadline, or you disagree with its answer, you may refer the complaint to the Financial Ombudsman Service.

The ombudsman can look at Duty-related complaints on several grounds. Consumers who feel they have been given unaffordable credit, or that a lender acted irresponsibly in providing a product, may be able to complain to the Financial Ombudsman Service³⁴. The ombudsman also handles complaints about the service received from a claims management company, for example the results of a claim or the fees charged³⁵.

What the FCA itself will and will not do matters here. The FCA cannot pay compensation or order a claims management company to compensate you, even if you have received poor service, though you can complain to the FCA about a claims company's conduct³⁵. The FCA can, in some circumstances, impose a requirement on an authorised person, an electronic money issuer or a payment service provider to establish and operate a consumer redress scheme³¹, and it is a designated public enforcer able to seek court orders that may include redress³¹. But these are industry-level powers, not a route for an individual complaint. The step-by-step process is in how to complain to a financial firm and taking a complaint to the Financial Ombudsman Service.

Checking a firm is authorised and avoiding scams

The Duty only protects you with firms that are actually authorised by the FCA, so checking a firm's status is a habit worth forming.

The steps are straightforward. First, check your provider is authorised by the Financial Conduct Authority³⁶. Second, find out whether the particular activity the firm is carrying out for you is regulated by the Prudential Regulation Authority or the FCA³⁶. You can use the online FCA register or telephone the FCA consumer helpline³⁷. The FCA also offers a Firm Checker tool you can use to confirm a firm is authorised and help avoid scams³⁸.

Scammers often pretend to be a real firm, so the detail matters: check that the contact details you have been given match those listed on the FCA's own records, to avoid scammers impersonating a genuine firm³⁸. The FCA is the go-to contact if you want to check whether a firm is legitimate or report a possible scam³⁹. If a firm turns out not to be authorised, the protections on this page, including the Consumer Duty and the Financial Ombudsman Service, may not be available to you at all, which is why the check comes first. More on this is in scams and fraud: a complete guide.

Small firms and how the Duty is applied

Smaller firms are not exempt. They are still expected to deliver the same good outcomes as all other firms¹. What differs is proportionality: the FCA applies the Duty in a way that fits a firm's size and customer base¹. A two-person advisory firm is not expected to run the governance machinery of a high street bank, but the outcomes its customers receive should be just as good.

This matters for customers of smaller lenders, brokers, insurers and financial advisers. The Duty is outcomes-based, not process-heavy, and the evidence a firm needs is proportionate to its scale and complexity¹. So a small firm cannot argue that the Duty is too big for it, and a customer of a small firm is entitled to the same standard of fair value, clear information and support as a customer of any large one.