Consumer Duty In 2025

Firms’ successes and challenges in embedding Consumer Duty were well documented in 2024. Conversation around the Duty is ongoing, and there is plenty of dialogue around how they should continue to refine their approach.

Recent sector feedback has led the FCA to produce a new webpage which consolidates the principles of the Duty to one place and summarises the regulator’s upcoming work. The regulator describes much of the work as “a pivot towards the Consumer Duty”, with the Duty increasingly becoming the underpinning principle of its supervisory approach.

Here, we look at what the industry can expect from the current and imminent work, and what firms should be thinking about in terms of navigating this successfully.

What is the regulator doing?

1. Embedding the Consumer Duty and Raising Standards:

Implementation and compliance: The regulator will continue to assess how firms are implementing and complying with the Consumer Duty to improve consumer outcomes

• Cross-cutting projects: There are three projects grouped into publications for Q4 2024 and Q1 2025:

• Board Reports and Complaints Analysis: Reviewing firms' responses to outcomes monitoring and systemic issues

• Treatment of Vulnerable Customers: Assessing firms' approaches to customers in vulnerable circumstances

• Consumer Support and Decision-Making: Evaluating how firms support customers and use communications to aid informed decisions

• Good practice and compliance: The regulator renews commitment to sharing good practice and setting expectations for improvement where standards are not met
• Proportional approaches: Encouraging firms to take proportionate approaches based on their size and activities

2. Enhancing Understanding of the Price and Value Outcome:

• Fair Value Assessments: Encouraging firms to use robust analysis to ensure fair value and take action where necessary
  
  Key Priorities:

• Platform Cash: Addressing concerns about interest on cash balances in investment platforms and SIPPs

• Pure Protection Insurance: Studying consumer engagement and competitive constraints, starting in H1 2025

• Unit-Linked Pensions and Savings: Examining transparency of charges and product value, with findings expected in Summer 2025

• Premium Finance: Reviewing fairness and competitiveness of borrowing for insurance, with an interim report in H1 2025

3. Sector-Specific Priorities:

• Retail banking: Focusing on cash savings, payment accounts, bereavement, and power of attorney, with findings in H1 2025
• Consumer finance: Assessing digital tools for credit agreements, with findings in H1 2025
• Payments and digital assets: Examining FX pricing clarity in payment services, planned for 2025
• Consumer investments: Addressing advice gaps, vulnerability identification, and PRIIPs regulation, with consultations and findings throughout 2024 and 2025
• General and life insurance: Reviewing claims handling and compliance, with findings in Q2 2025
• Sustainable Finance: Publishing final rules on SDR and investment labels in Q2 2025

4. Realising the Benefits of the Consumer Duty:

• Call for input: The FCA has sought feedback on how, in light of the unifying principles of Consumer Duty, financial services regulation could be simplified

The Huntswood perspective:

The FCA has been clear that Consumer Duty should underpin firms’ work, with the recent narrative emphasising this point. With regards to embedding the Duty and the upcoming focus areas, have you:

• Ensured that, in forums attended by the board, there is an appropriate level of insight provided on customer outcomes, measured in a way which does not place over-reliance on productivity / adherence metrics?

• Conversely, as a leader, are you receptive to the wealth of insight which exists within your business which can be used to demonstrate outcomes or highlight issues? Are you inquisitive enough?
• Does your business undertake root cause analysis on complaints which looks to isolate and address issues up and downstream of complaints, e.g. the product or service issues driving complaints?
• Are you up-to-date on best practice in your sector around vulnerability? Checking your approach against contemporary best practice will stand you in better stead if obligations arise from the regulator’s upcoming work
• Is data and information on product terms and conditions, disclosures and other info exchanged at point of sale easily accessible within your firm?
• Do you have a relationship with the regulator and do you engage them in conversations on what proportional looks like to your firm based on size, complexity and risk?
• Is value seen as more than the cost of a product? Do you look beyond customers’ return on investment and assess overall suitability? Firms that are well placed to demonstrate the benefits of a product – such as good levels of customer service, through data – will be best placed to demonstrate fair value. Ensuring that customers are able to use a product, generally in line with its design, will show the inherent value of the service and justify competitive pricing
• Keep your eyes peeled for the FCA’s guidance arising from its Call for Input, which is expected soon

Further guidance Huntswood has provided on Consumer Duty in 2024:

Consumer duty continues to challenge firms. Particularly around fair-value assessments, good outcome monitoring and demonstrating comprehensive adherence. The market has shifted significantly since the inception of the duty in 2023; but there are still areas which the FCA has commented on as needing improvement. In 2024 these includes:

• Insurance claims servicing
• Fair-value assessments