Treating Customers Fairly: the rules before the Consumer Duty

Treating Customers Fairly was the standard the Financial Conduct Authority expected of banks, lenders, insurers and advisers for years. It has been replaced. The rule that now applies is the Consumer Duty, built on one principle: "A firm must act to deliver good outcomes for retail customers."¹ Underneath that sit three cross-cutting rules and four outcomes covering products and services, price and value, customer understanding, and customer support².

The change matters to you in two directions. For anything a firm does now, the Consumer Duty is the test. For conduct from the years when Treating Customers Fairly applied, that older standard is still how a complaint is judged, because Consumer Scotland's position is that it is fair and reasonable for firms to be held to account on the basis of the standards in place at the time of the transaction³. The FCA also says Treating Customers Fairly set out outcomes that remain relevant².

The Consumer Duty is not limited to new business. There are particular provisions concerning closed products and existing products distributed to retail customers before 31 July 2023⁴. A mortgage, policy or investment taken out years ago is still within scope.

What treating customers fairly meant, and what replaced it

Treating Customers Fairly was an outcomes-based standard rather than a list of banned behaviours. The FCA describes it as detailing a set of six outcomes: fair treatment as central to corporate culture, products designed to meet identified consumer needs, clear information before, during and after sale, suitable advice, products performing as the customer was led to expect, and no unreasonable post-sale barriers². Those six outcomes are the shape of the regime that governed most retail financial business for well over a decade.

The Consumer Duty replaced it. The legal basis is FCA Principle 12 For Business, with expected standards set out in PRIN2A of the FCA Handbook². The FCA describes the Duty as a positive intervention that is raising standards across the system⁷. Not everyone saw it as a clean break: StepChange's response to the FCA consultation described the proposal as arguably not sufficiently different to the present Treating Customer Fairly framework⁸.

That continuity is why the older standard still turns up in complaints. Where a firm's conduct happened under Treating Customers Fairly, the question is whether the firm met the standards in force then. Consumer Scotland agrees firms should be held to account on the basis of the standards in place at the time of the transaction³. The Financial Ombudsman Service applies the same logic case by case: in one complaint about insurance premium increases, it was satisfied that the insurer had treated the customer fairly⁹.

Some rules never changed at all. National Debtline's guidance is blunter: a lender "must deal fairly with any customer who has a mortgage shortfall debt"¹⁰.

The Consumer Duty: one principle, three rules, four outcomes

The Consumer Duty is deliberately compact. One principle sets the overall standard of behaviour the FCA wants from firms¹. Three cross-cutting rules explain how firms should act to deliver good outcomes². Four outcomes set out more detailed expectations in the areas the FCA treats as the key elements of the customer relationship².

The three cross-cutting rules are: act in good faith towards customers, which the FCA glosses as treating customers honestly and fairly; avoid causing foreseeable harm to retail customers; and enable and support retail customers to pursue their financial objectives². The first of those is stated in the FCA's own words as "Act in good faith towards customers. Treat customers honestly and fairly."¹

The four outcomes are Products and Services; Price and Value; Customer Understanding; and Customer Support². They are a suite of rules and guidance rather than four separate regimes, and the FCA counts them as four areas of firm conduct¹.

The Duty applies across all of a firm's regulated activities, from high-level strategic planning to individual customer interactions². It applies in relation to a firm's retail market business, and also where a firm communicates or approves financial promotions addressed to, or likely to be received by, a retail customer⁴. The definition of a retail customer includes a prospective customer, so someone still deciding whether to buy is covered⁴.

The FCA requires financial businesses to consider the needs, characteristics and objectives of their customers, including those with characteristics of vulnerability, at every stage of the customer journey⁵.

Treating customers fairly if you are in vulnerable circumstances

Vulnerability is where the two regimes overlap most visibly, because the older fair-treatment rules and the Consumer Duty both bite on it. The FCA defines a vulnerable customer as "someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care"⁵.

The Consumer Duty creates a duty for firms to identify vulnerable customers and ensure the design and delivery of their services are tailored appropriately to avoid harm¹¹. FCA rules also say that all firms must have specific policies and procedures for dealing with vulnerable customers who fall behind with payments, which includes people with mental health difficulties¹¹.

The mortgage rulebook goes further and is more specific. That is a rule, not guidance, and it applies whether or not the customer says anything about their circumstances.

Outside financial services, the same principle appears in other regulated sectors. Ofwat's Paying Fair Guidelines expect water companies to have specific policies, procedures and systems for proactively identifying and offering support packages for customers in vulnerable circumstances¹². The Financial Ombudsman Service has published guidance for businesses on supporting customers in vulnerable situations⁷.

What fair treatment looks like in practice varies. Help to Buy Wales states that where appropriate, vulnerable customers may be offered more favourable treatment than non-vulnerable customers to account for their vulnerability, for example being provided with more time to make financial decisions¹³. Its arrears policy says customers will be treated in accordance with the principles of Treating Customers Fairly, with due consideration given to forbearance and breathing space as appropriate¹⁴. In equity release, the Equity Release Council says much care is taken throughout the process to ensure that any vulnerable customers, such as someone with a sight impairment, are appropriately catered for and concerns such as coercion addressed before the case proceeds¹⁵.

Smaller firms follow the same standard

The Consumer Duty applies to all FCA authorised firms' regulated activities, from high-level strategic planning to individual customer interactions². Size changes how a firm applies the Duty, not whether it applies. The FCA's word for this is proportionality: applying the Duty in a way that fits a firm's size and customer base¹. Smaller firms are still expected to deliver the same good outcomes as all other firms¹.

That distinction matters if you are dealing with a small broker, an independent adviser or a local firm. The FCA's framing is that proportionality is about method, not a lower bar. The outcomes themselves do not shrink.

Small businesses have their own route into the complaint system. About 99% of small businesses and micro-enterprises in the UK can bring a complaint to the Financial Ombudsman Service¹⁶. That is a wider net than many owners assume.

There is also a question of timing when standards change. Consumer Scotland's position is that firms should be held to account on the basis of the standards in place at the time of the transaction³. So a firm's obligations are fixed by the rules that applied when it acted, not by whatever the rulebook says when you complain.

Public confidence in how firms behave is mixed. In 2024, 36% of adults agreed that most financial firms are honest and transparent in the way they treat them, up 5 percentage points since 2017, while 27% disagreed, down 9 percentage points¹⁷. The FCA's own survey work records both figures.

Checking a firm and complaining when you are treated unfairly

Before anything else, check who you are dealing with. The FCA has a Firm Checker, a tool to help consumers check if financial services firms are authorised and have permission to sell products and services⁶. The FSCS tells consumers to check a provider is authorised by the Financial Conduct Authority as the first step in understanding what protection applies¹⁸. You can use the online FCA register or telephone the FCA consumer helpline¹⁹.

The check is specific, not just a name search. For a lender, the FCA's guidance is to search the firm by name, select 'Borrowing money, including credit card lending and credit information', and check that the firm is 'Authorised' and has permission to 'Lend you money on an unsecured basis'²⁰. The Financial Ombudsman Service says to use the FCA's Firm Checker to confirm the firm is authorised and help avoid scams²¹.

If something has gone wrong, the first step is a complaint to the firm. StepChange's guidance on creditor conduct says to make a complaint if a creditor does not treat you fairly or acts outside the law²². Citizens Advice frames the same question as checking whether a financial service has followed the rules²³.

The Financial Ombudsman Service can look at the substance of how you were treated, not only at whether a procedure was followed. In mortgage underfunding cases it checks whether the lender or broker acted fairly when the problem was reported, even if it was the customer's mistake, including whether the lender worked constructively to set up a reasonable plan for dealing with the underfunding²⁴. Where it finds unfair treatment, it asks the business to put things right, usually by putting you back in the position you would be in if things had not gone wrong, which can include increasing an unfair valuation with interest and compensation for distress or inconvenience²⁵.

The ombudsman's reach is broad: it covers banking and payments²⁶, insurance²⁷, mortgages²⁴, motor insurance repairs²⁵, and pensions and annuities²⁸. Its consumer guidance on how to complain sets out the route in²⁹.