FCA Consumer Duty comes into force

The Financial Conduct Authority's Consumer Duty came into force in July 2023, requiring firms to act to deliver good outcomes for retail customers¹. The Duty was operationalised from July 2023 with a final implementation milestone on 31 July 2024². The FCA has described the Duty as setting the regulatory standards for firms to deliver the best outcomes for their customers².

The Duty's introduction supported the implementation of the Mortgage Charter, a set of standards agreed between the UK's largest mortgage lenders, the FCA and the Chancellor³. The Charter, published in June 2023, set out commitments for regulated residential mortgage borrowers worried about higher rates³. The FCA said the Consumer Duty coming into force in July would enable it to support implementation of the Charter by its signatories³.

The Charter's commitments include that, from 26 June, a borrower will not be forced to leave their home without their consent unless in exceptional circumstances, in less than a year from their first missed payment³. With effect from 10 July, customers approaching the end of a fixed rate deal will have the chance to lock in a deal up to six months ahead³. Customers who are up to date with payments can switch to interest-only payments for six months or extend their mortgage term to reduce monthly payments, with the option to revert to their original term within six months³. These options can be taken without a new affordability check or affecting their credit score³. The Charter states that monthly payments after the support may be higher than they otherwise would have been and overall costs over the life of the mortgage will be higher³. The commitments do not apply to buy-to-let mortgages³.

The lenders signed up to the Charter represent approximately 90% of the mortgage market³. The FCA reported 0.86% of total residential mortgage balances in arrears in the first quarter of 2023, which it said was significantly lower than the 3.32% rate in 2009³.

Why it matters for households

The Consumer Duty applies to firms across financial services, including those providing mortgages, savings, credit and insurance. For mortgage borrowers, the Charter commitments took effect from 26 June and 10 July³. Borrowers who are up to date with payments and not seeking to borrow more or change their repayment type or term can switch to a new deal at the end of their fixed rate deal without another affordability check, which the Charter says applies to 97% of the mortgage market³. Anyone worried about mortgage repayments can contact their lender for help and guidance without any impact on their credit file³. The government also confirmed that, if on Universal Credit, borrowers can now receive help with mortgage interest payments after three months³.

What happens next

The lenders, UK Finance and the FCA committed to implementing the full Charter at pace, requiring changes to the FCA rulebook and lenders' procedures, with an update to Government by Friday 30 June³. The FCA said it would work rapidly with signatories to adopt the necessary rules by Friday 30 June⁴. The Prudential Regulation Authority confirmed the Charter measures are not expected to lead to an immediate or automatic increase in capital requirements for banks, depending on the circumstances³.