What Does Consumer Duty Mean for Your Operations?

What is Consumer Duty?

Consumer Duty is the FCA's overarching standard of conduct for firms that serve retail customers. It came into force on 31 July 2023 for open products and services, with closed products following on 31 July 2024. It replaces the previous TCF (Treating Customers Fairly) framework with something considerably more demanding.

At its core, Consumer Duty requires FCA-regulated firms to demonstrate - not just assert - that they are delivering good outcomes for retail customers across the entire product lifecycle. It applies to banks, insurers, mortgage brokers, investment firms, MGAs, consumer credit lenders, and any other firm with permissions that touch retail consumers.

The distinction from TCF matters. TCF was principles-based and largely backward-looking - you reviewed whether you had treated customers fairly. Consumer Duty is outcomes-based and forward-looking. You are required to monitor whether customers are actually receiving good outcomes and act on what that monitoring tells you.

Why Consumer Duty is not a compliance project

The majority of regulated businesses treated the initial Consumer Duty implementation as a compliance project - a policy update, a gap analysis, some training, and a board sign-off. That approach was understandable given the initial deadline pressure. It is also why many businesses now have a Consumer Duty framework that looks complete on paper but is not embedded in how the business actually operates.

The FCA's own supervisory messaging since the July 2023 deadline has been consistent: the regulator is looking for evidence of genuine embedding, not documentation of intent. Firms that cannot demonstrate MI-backed monitoring of customer outcomes, clear ownership of Consumer Duty at senior management level, and a credible process for identifying and addressing poor outcomes are at supervisory risk - regardless of whether their policy library is up to date.

The operational implications are significant. Consumer Duty touches product design, customer communications, pricing, complaints handling, sales processes, training, MI, and board reporting. These are operational functions, not compliance functions. Making Consumer Duty genuinely embedded requires operational change - not just a compliance team working harder.

The four outcomes - what they mean operationally

Consumer Duty is structured around four consumer outcomes that firms must deliver. Each has material operational implications:

Where most FCA-regulated businesses fall short

Based on the FCA's supervisory activity and its published findings to date, the most common operational gaps are:

Product governance that exists on paper but not in practice

Many firms have product governance frameworks that were created or updated for Consumer Duty but are not genuinely embedded in how products are designed, reviewed, or withdrawn. The test is whether the product governance process actually changes decisions - not whether it is documented. If product governance meetings are administrative sign-offs rather than genuine challenge sessions, the framework is not working.

Value assessments that were done once and never updated

Price and value assessments completed in 2022 or 2023 as part of the initial implementation exercise are now outdated. Market conditions, loss ratios, competitive pricing, and customer outcomes have all moved. A static value assessment document does not satisfy the ongoing monitoring obligation Consumer Duty requires.

MI that measures activity, not outcomes

Firms that report Consumer Duty performance using complaint volumes, training completion rates, and policy sign-off dates are measuring activity, not outcomes. The FCA wants to see evidence that customers are actually receiving good outcomes - which requires MI on things like claim settlement rates, fair value assessment results, vulnerable customer identification rates, and retention patterns for products that may represent poor value.

Complaints handling that is operationally disconnected from Consumer Duty

Complaints data is one of the richest signals available for Consumer Duty monitoring. In many firms, complaints handling is operationally separate from the compliance or risk function that owns Consumer Duty reporting. The result is that patterns in complaints data - which could indicate a systemic poor outcome - are not reaching the people responsible for Consumer Duty oversight.

Vulnerable customer processes that are inadequate at point of interaction

Most firms have a vulnerable customer policy. Many have inadequate processes for actually identifying, recording, and responding to vulnerability in real-time customer interactions - particularly in distributed sales, broker networks, or digital channels where the policy cannot be enforced in the same way it can be in a contact centre.

The data and MI problem

The most consistent operational challenge for Consumer Duty compliance is MI. The FCA's standard requires firms to monitor customer outcomes on an ongoing basis and to be able to evidence that monitoring to the regulator. In most FCA-regulated businesses, the data required to do this is held in multiple systems - policy admin, CRM, claims, complaints, and finance - and is not routinely aggregated into a Consumer Duty performance view.

This is not a technology problem in the first instance. It is a data architecture and ownership problem. The questions that Consumer Duty monitoring requires - what proportion of customers are renewing products that represent poor value? what is the claims settlement rate by product and customer segment? where are customers dropping out of digital journeys that should result in them getting appropriate support? - require someone to define what the data needs to show, who owns it, and how frequently it needs to be reviewed.

For many mid-market regulated businesses, building this MI infrastructure is the most significant operational task associated with genuine Consumer Duty embedding - and the one most frequently deferred because it requires both data capability and operational process change simultaneously.

Board and senior management accountability

Consumer Duty explicitly requires firms to have a named individual at senior management function level who is accountable for Consumer Duty compliance. That individual is required to be able to demonstrate to the FCA, on request, that they have adequate visibility of Consumer Duty performance and that the firm is taking action where outcomes fall short.

The board reporting implication is significant. Consumer Duty performance needs to be a standing agenda item at board or executive committee level - not because the regulator requires a specific meeting format, but because the accountability obligation requires senior management to be genuinely informed about customer outcome performance and to be visibly making decisions based on that information.

In many mid-market regulated businesses, Consumer Duty reporting to the board consists of a compliance update confirming that policies are in place and training is complete. That level of reporting does not satisfy the accountability obligation and will not withstand supervisory scrutiny.

Distributor and third-party obligations

Consumer Duty extends obligations through distribution chains. Manufacturers must have information sharing arrangements with distributors that enable both parties to meet their Consumer Duty obligations. Distributors are accountable for the outcomes delivered to end customers regardless of whether the underlying product is manufactured by a third party.

For MGAs and insurance brokers, this creates specific operational challenges. An MGA writing business on behalf of a capacity provider is typically a distributor in Consumer Duty terms - and must be able to demonstrate that its distribution processes, customer communications, and claims handling are delivering good outcomes, not just that it has passed on the manufacturer's product documentation.

Where distribution involves multiple parties - coverholder to MGA to capacity provider, or IFA network to platform to fund manager - each party needs to understand its own Consumer Duty obligations and the information flows required between parties to enable that. The FCA's expectation is that these arrangements are documented, reviewed, and working in practice.

Consumer Duty is ongoing - not a one-time project

The most important operational implication of Consumer Duty is that it is a permanent change to how regulated businesses must operate, not a project with an end date. The annual board report on Consumer Duty performance - required by the FCA for most firms - is a symptom of this. It requires firms to produce evidence of ongoing monitoring and to demonstrate that they are identifying and addressing poor outcomes on a continuous basis.

Businesses that treated Consumer Duty as a 2023 implementation project and have not revisited it since are at increasing supervisory risk. The FCA's initial implementation phase was characterised by significant regulatory forbearance while firms got their initial frameworks in place. The current phase is characterised by supervision of embedding - and the gap between firms that have genuinely embedded Consumer Duty into operations and those that have a paper framework is becoming visible in FCA supervisory activity.

How to assess your current position

For most FCA-regulated businesses, the starting point for understanding their Consumer Duty position is an honest operational assessment - not a policy review. The questions that matter are:

• Does the business have MI that demonstrates customer outcomes across all four Consumer Duty outcomes, or does it have MI that demonstrates that Consumer Duty-related activities have been completed?
• Is the Consumer Duty board report a genuine assessment of whether customers are receiving good outcomes, or is it an administrative confirmation that the framework exists?
• If the FCA asked the named SMF individual to demonstrate their personal visibility of Consumer Duty performance in the last quarter, what evidence would they be able to produce?
• Where the monitoring has identified poor outcomes - and it should have identified some - what remediation has been taken and how was the decision to remediate made?
• Are vulnerable customer identification and response processes actually functioning at the point of customer interaction, or are they functioning in policy only?

The answers to these questions determine whether a business has a Consumer Duty compliance framework or a Consumer Duty compliance capability. The FCA is now consistently distinguishing between the two.