Consumer Duty One Year On: What Firms Should Be Doing Now

The Consumer Duty came into force on 31 July 2023 for open products and services, marking a fundamental shift in how the FCA expects firms to treat their customers. Now, more than two years on, the regulatory focus has moved decisively from implementation to embedding. For compliance teams and boards across the UK financial services sector, the question is no longer "are we ready?" but rather "are we delivering good outcomes consistently, and can we prove it?"

This article examines what the FCA expects from firms in this second phase of Consumer Duty compliance, identifies common gaps regulators are finding, and provides practical steps your firm should be taking now to demonstrate genuine customer-centric culture.

Key FCA Expectations for Year Two and Beyond

The FCA has been unambiguous: Consumer Duty is not a one-off implementation exercise. In their communications throughout 2024, including several sector-specific "Dear CEO" letters, the regulator has emphasised that firms must now demonstrate they are actively delivering good outcomes for consumers, not merely that they have policies and procedures in place.

From Compliance to Culture

The Policy Statement PS22/9 and accompanying Finalised Guidance FG22/5 made clear that the Consumer Duty requires a fundamental shift in firm culture. The FCA expects to see evidence that:

Customer outcomes drive decision-making at all levels of the organisation, not just within compliance functions
Management information (MI) captures meaningful outcome data that is actively used to identify and address consumer harm
Boards and senior management are genuinely engaged with Consumer Duty requirements, challenging poor outcomes and driving improvement
Staff at all levels understand how their role contributes to good customer outcomes and feel empowered to raise concerns

The regulator has stated it will be looking beyond documentation to assess whether firms have truly embedded a customer-centric approach. This means supervisory visits, thematic reviews, and data requests will focus on actual outcomes rather than process compliance alone.

Ongoing Monitoring is Non-Negotiable

One of the most significant expectations for this phase is robust, ongoing monitoring. The FCA expects firms to have moved well beyond baseline assessments and to be operating mature monitoring frameworks that:

Track outcomes across all four Consumer Duty outcomes
Segment data by customer characteristics, including vulnerability indicators
Enable early identification of potential consumer harm
Drive timely remedial action when issues are identified

Firms that cannot demonstrate effective ongoing monitoring are likely to face supervisory scrutiny, regardless of the quality of their initial implementation work.

Common Compliance Gaps: What the FCA is Finding

Through its supervisory work, multi-firm reviews, and thematic assessments, the FCA has identified several recurring compliance gaps. Understanding these common failings is essential for firms seeking to strengthen their own arrangements.

Superficial Value Assessments

Many firms conducted value assessments during implementation but have failed to make these meaningful ongoing exercises. The FCA has found instances where:

Assessments compare price to competitors without genuinely evaluating the benefits delivered to customers
Methodologies do not adequately consider the full cost to the customer, including hidden charges, exit fees, and opportunity costs
Poor value products remain on sale despite assessment findings, with insufficient remedial action taken
There is no clear link between value assessment outcomes and product governance decisions

What good looks like: Value assessments should be dynamic, data-driven exercises that genuinely evaluate whether customers receive fair value. They should consider the total price paid against the total benefits received, account for different customer segments, and directly inform decisions about product pricing, features, and continued sale.

Inadequate Vulnerability Strategies

Whilst most firms have policies addressing vulnerable customers, the FCA continues to find significant gaps in practical implementation:

Front-line staff lack the training and empowerment to identify and respond to vulnerability indicators
Systems do not capture or flag vulnerability information effectively
Outcomes for vulnerable customers are not monitored separately, making it impossible to identify whether these customers experience worse outcomes
Reasonable adjustments are inconsistently applied or overly bureaucratic to access

What good looks like: Effective vulnerability strategies go beyond policy to create genuine flexibility in how firms serve customers in vulnerable circumstances. This includes proactive identification, consistent recording, tailored support, and outcome monitoring that enables comparison between vulnerable and non-vulnerable customer groups.

Weak Governance and Board Oversight

The FCA has expressed concern that in many firms, Consumer Duty governance remains superficial:

Board papers focus on process metrics (training completion, policy sign-off) rather than outcome data
Boards receive insufficient MI to genuinely understand whether customers are experiencing good outcomes
Challenge from non-executive directors is lacking, with Consumer Duty items receiving insufficient scrutiny
There is no clear escalation process when monitoring identifies potential consumer harm

What good looks like: Boards should receive regular, meaningful MI that enables them to assess whether the firm is delivering good customer outcomes. This should include trend analysis, segmented data, complaint root cause analysis, and clear RAG-rated assessments of performance against each of the four outcomes.

Incomplete Third-Party Oversight

For firms using distributors, outsourced service providers, or other third parties in the customer journey, the FCA has found that Consumer Duty requirements are often inadequately reflected in these arrangements:

Contracts do not include sufficient Consumer Duty requirements
Firms lack visibility of third-party performance against customer outcome metrics
There are no effective mechanisms for monitoring or auditing third-party compliance
Responsibility for customer outcomes is unclear or disputed between parties

What good looks like: Firms must retain responsibility for customer outcomes regardless of who in the distribution chain interacts with the customer. This requires robust contractual provisions, meaningful MI sharing, regular performance reviews, and clear escalation routes.

The Four Outcomes Revisited: Current Expectations

As we move beyond initial implementation, the FCA's expectations for each of the four Consumer Duty outcomes have crystallised. Here is what firms should be focusing on now.

Products and Services

The focus has shifted from initial target market assessments to ongoing product governance:

Regular reviews: Target markets and distribution strategies must be reviewed regularly, not just at launch
Performance monitoring: Firms should track how products perform for customers over time, identifying where products fail to meet expectations
Remedial action: When monitoring identifies products causing harm, firms must act swiftly to address the issue, which may include product withdrawal or customer remediation
Closed book consideration: Since 31 July 2024, closed products and services have been in scope. Firms must ensure these legacy products also deliver fair value and good outcomes

Price and Value

Value assessment must now be business as usual:

Ongoing assessments: Value should be assessed regularly, not just during implementation
Methodology refinement: Firms should be refining their methodologies based on experience and regulatory feedback
Action on findings: Assessments that identify poor value must lead to genuine change, whether to pricing, product features, or withdrawal
Distribution chain consideration: Manufacturers must consider value across the whole distribution chain, and distributors must assess whether the value is maintained after their charges are added

Consumer Understanding

Communications testing and improvement should be continuous:

Ongoing testing: Customer communications should be regularly tested, particularly when products, terms, or customer demographics change
Data-driven refinement: Firms should use data on customer understanding (enquiry patterns, complaints, behaviour) to identify and address communication failures
Digital journey assessment: Online and app-based customer journeys require particular attention to ensure key information is prominent and accessible
Timing consideration: Information must reach customers when they need it to make informed decisions, not just when it is convenient for the firm to provide it

Consumer Support

Support must be consistently delivered, not just promised:

Service quality monitoring: Firms should track metrics such as wait times, resolution rates, and customer satisfaction across all support channels
Friction reduction: Barriers to switching, complaining, or exercising contractual rights must be actively identified and removed
Channel parity: The quality of support must be consistent regardless of which channel the customer uses, with appropriate accommodations for those who cannot use digital channels
Complaints as intelligence: Complaint data should be systematically analysed to identify potential Consumer Duty issues, with trends reported to the board

Board Responsibilities: The Annual Review Requirement

One of the most significant governance requirements introduced by the Consumer Duty is the annual board review. PRIN 2A.9 requires firms to produce an annual report for the board assessing whether the firm is delivering good outcomes for customers.

What the Annual Report Must Cover

The FCA expects the annual report to provide a comprehensive assessment including:

Outcome evidence: Data and analysis demonstrating whether the firm is delivering good outcomes across all four outcome areas
Gap identification: Honest assessment of areas where outcomes may be falling short of expectations
Action plans: Clear plans for addressing identified gaps, with timelines and accountability
Trend analysis: Comparison with previous periods to identify whether outcomes are improving or deteriorating
Forward look: Emerging risks to good customer outcomes and how the firm plans to address them

Timing and Accountability

The first annual board reports were due by 31 July 2024. Firms should now be well into their second annual review cycle, with improved data and more mature analysis capabilities.

Critically, the board report is not merely a compliance exercise. The FCA expects boards to genuinely engage with the findings, challenge management where outcomes are poor, and hold individuals accountable for improvement. Boards that simply note reports without meaningful discussion and follow-up action are unlikely to satisfy supervisory expectations.

Individual Accountability

Under the Senior Managers and Certification Regime (SM&CR), individuals with relevant responsibilities can be held personally accountable for Consumer Duty failures. This includes:

The SMF responsible for compliance oversight (typically the Chief Compliance Officer)
Product owners and business line heads with responsibility for customer-facing activities
Non-executive directors with responsibility for challenging management on customer outcomes

Firms should ensure that Statement of Responsibilities documents clearly allocate Consumer Duty accountabilities and that individuals understand their obligations.

Practical Steps for 2025: Your Action Plan

Based on regulatory expectations and common compliance gaps, here are the practical steps firms should be taking now to strengthen their Consumer Duty compliance.

1. Conduct a Maturity Assessment

Undertake an honest assessment of where your Consumer Duty arrangements stand relative to FCA expectations. This should go beyond checking whether policies exist to evaluate whether they are operating effectively and delivering good outcomes.

Key questions include:

Are we genuinely delivering good outcomes, or merely documenting that we intend to?
Does our MI enable us to identify emerging harm before it crystallises?
Would our board papers satisfy a sceptical regulator that we are taking Consumer Duty seriously?

2. Strengthen Outcome Monitoring

Review and enhance your outcome monitoring framework:

Identify gaps in data capture that prevent meaningful outcome analysis
Implement segmented reporting that enables comparison across customer groups
Establish clear thresholds and triggers for escalation when outcomes deteriorate
Ensure monitoring covers closed products as well as open ones

3. Refresh Value Assessments

If your value assessments were completed in 2023 and not meaningfully updated since, now is the time to refresh them:

Update pricing and benefit data
Consider whether market conditions have changed the value equation
Ensure methodologies reflect regulatory feedback and best practice
Document clear rationale for conclusions and any remedial action taken

4. Enhance Board Reporting

Review the quality of Consumer Duty MI reaching your board:

Does it enable genuine assessment of customer outcomes?
Is data presented in a way that facilitates meaningful challenge?
Are trends clearly visible?
Is there sufficient granularity to identify issues in specific products or customer segments?

5. Test Your Culture

Assess whether Consumer Duty is genuinely embedded in your firm's culture:

Do staff understand how their role contributes to good customer outcomes?
Are customer interests considered in routine business decisions?
Do staff feel empowered to raise concerns about potential customer harm?
Is customer-centric behaviour recognised and rewarded?

6. Review Third-Party Arrangements

For firms relying on third parties in the customer journey:

Review contracts for adequacy of Consumer Duty provisions
Assess the quality of MI received from third parties
Consider whether oversight mechanisms are sufficient
Clarify accountability for customer outcomes in the distribution chain

7. Prepare for Regulatory Scrutiny

Assume that your firm may face FCA scrutiny on Consumer Duty:

Ensure key documents are readily accessible and clearly organised
Brief relevant staff on how to respond to information requests
Identify and address obvious gaps before they are found by regulators
Consider whether independent assurance would identify issues that internal review has missed

How MEMA Can Help

The Consumer Duty represents a significant ongoing compliance challenge for firms of all sizes. MEMA Consultants has deep expertise in helping firms move from implementation to genuine embedding of Consumer Duty requirements.

Our services include:

Maturity assessments that provide honest evaluation of your current position against FCA expectations
Outcome monitoring framework design to ensure you capture meaningful data and can demonstrate good outcomes
Board reporting enhancement to give your senior management the MI they need to provide effective oversight
Value assessment methodology development and refresh
Third-party oversight frameworks that ensure you maintain control of customer outcomes across the distribution chain
Mock regulatory reviews that test your arrangements against likely FCA scrutiny
Training programmes for boards, senior management, and front-line staff

Our team includes former FCA supervisors who understand exactly what the regulator expects to see and experienced consultants who have helped firms across the sector strengthen their Consumer Duty arrangements.

About the Author

The MEMA Regulatory Team comprises former FCA supervisors and experienced compliance consultants with extensive expertise in Consumer Duty implementation and ongoing compliance across all FCA-regulated sectors.

This article is for general guidance only and does not constitute legal or regulatory advice. Firms should seek independent professional advice tailored to their specific circumstances.