The FCA and Consumer Duty
The FCA and Consumer Duty
Items in this lesson
The FCA and Consumer Duty
Open the lesson by situating the FCA as the UK's conduct regulator for financial services and markets. Signal that the lesson will focus on what firms must do under Consumer Duty, how this affects promotions and vulnerable customers, and how the FCA might investigate a bank in practice.
Learning goal
I can explain the FCA Consumer Duty, including its three cross-cutting rules and four outcomes, and apply it to real cases.
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What words come to mind when you hear consumer protection in finance?
Use this to surface prior ideas such as fairness, trust, scams, support, rules, transparency or complaints. Link student responses to the FCA's role and the idea of good outcomes.
What the FCA does
The Financial Conduct Authority (FCA) regulates conduct in UK financial services
It aims to protect consumers, protect market integrity and promote effective competition
The FCA sets rules, supervises firms and can take enforcement action
Consumer Duty is one of the FCA's key frameworks for raising standards
Clarify that the FCA is not the same as the Prudential Regulation Authority. Keep the focus on conduct: how firms treat customers, communicate, design products and provide support.
Why Consumer Duty was introduced
Previous rules did not always prevent poor customer outcomes
Some firms met the letter of the rules but still caused harm
The FCA wanted a higher standard centred on good outcomes
Consumer Duty makes firms act proactively, not just avoid obvious misconduct
Useful contrast: older compliance culture could focus on disclosure and process; Consumer Duty focuses more clearly on what customers actually experience and whether they can make effective decisions.
What Consumer Duty requires
Consumer Duty sets a higher expectation for firms dealing with retail customers. Firms must act to deliver good outcomes across the customer journey, from product design and promotion to ongoing support and complaints handling.
Stress the phrase 'retail customers'. You may note that firms should be able to show, with evidence, how they are monitoring and improving outcomes.
The structure of Consumer Duty
Consumer principle: act to deliver good outcomes for retail customers
Cross-cutting rules: standards for behaviour that apply across all activities
Four outcomes: the areas where firms must deliver those good outcomes
Together, these shape how the FCA judges firm conduct
This slide gives the map for the lesson. Keep returning to this structure so students can place each detail in the right part of the framework.
The consumer principle
A firm must act to deliver good outcomes for retail customers.
This is the headline standard. It pushes firms to consider whether customers are actually being helped to make effective decisions and receive fair treatment, rather than simply being given information.
Highlight that 'good outcomes' does not mean every customer gets the result they hoped for; it means the firm has acted properly in design, communication, price and support.
Cross-cutting rule 1
Firms must act in good faith towards retail customers
They should deal honestly, fairly and openly
They must not exploit information gaps or customer trust
Behaviour matters as much as formal compliance
Examples you can mention orally: hiding key limits in small print, steering customers into unsuitable options, or relying on customer confusion would conflict with good faith.
Cross-cutting rule 2
Firms must avoid causing foreseeable harm to retail customers
'Foreseeable' means harm a firm could reasonably predict
Firms should identify risks in products, communications and processes
If harm is predictable, the firm is expected to prevent or reduce it
A helpful distinction: this is not only about reacting after harm occurs. The rule expects firms to think ahead and design out avoidable risks.
Cross-cutting rule 3
Firms must enable and support retail customers to pursue their financial objectives
Customers should be able to understand information and use products effectively
Support should not create unnecessary barriers
The firm should make it easier, not harder, for customers to act in their own interests
You can link this to practical issues such as clear explanations, easy switching or cancellation routes, and support that works for different customer needs.
The three rules together
Honest treatment
Prevention of avoidable harm
Real support for customer decisions
Exploiting customers
Ignoring obvious risks
Creating friction that traps customers
What they encourage
What they stop
This comparison helps students distinguish the rules without memorising long wording alone. Emphasise that the three rules apply across all four outcomes.
What is the headline standard in the consumer principle?
Deliver good outcomes
Promote market integrity
Avoid all complaints
Maximise customer choice
Tests the distinction between the FCA's wider objectives and the specific Consumer Duty principle. 'Promote market integrity' belongs to the FCA's role, not the consumer principle.
Complete the summary
Consumer Duty includes a consumer principle, three cross-cutting rules and four outcomes. The principle says a firm must deliver good outcomes for retail customers. One rule is to act in good faith and another is to avoid causing foreseeable harm.
A compact recap of the framework before moving into the four outcomes.
Why do the three rules matter together?
Expected elements: students should explain that the three rules shape behaviour across all activities and outcomes; good faith focuses on honest and fair treatment, foreseeable harm on prevention, and enable and support on helping customers act effectively without barriers.
Outcome 1: products and services
Products and services should be designed to meet the needs of a clear target market
Distribution should match that target market
A product is not suitable just because it is legal or profitable
Firms should review whether products continue to work for customers
You may introduce the idea of product governance: firms should know who the product is for, who it is not for, and whether it is being sold appropriately.
Outcome 2: price and value
Customers should receive fair value
Price must be reasonable compared with the benefits
High fees, weak benefits or hidden charges can signal poor value
The FCA looks at the overall relationship between cost and benefit
Clarify that fair value does not mean the cheapest option. A higher price may still be acceptable if the benefits, quality and service justify it.
Outcome 3: consumer understanding
Communications should help customers make effective, timely and properly informed decisions
Information must be clear, fair and not misleading
Important points should be prominent, not buried
Firms should test whether customers are likely to understand what they see
This is the strongest bridge into financial promotions. Stress that clarity is judged by likely customer understanding, not by whether every fact appears somewhere.
Outcome 4: consumer support
Customers should receive support that meets their needs throughout the relationship
Help should be timely and easy to access
Firms should not use unreasonable barriers to complaints, cancellation or switching
Support processes should work for the customers who need them
Good oral examples: long waiting times, confusing complaint routes, or making cancellation much harder than sign-up may indicate poor support.
How the four outcomes connect
Before sale
After sale
Ongoing understanding
Practical support
Monitoring outcomes
Fixing problems
Product design
Target market
Price and value
Clear promotions
Make the customer journey explicit. Consumer Duty is not a single point-in-time test; it follows the customer from design to ongoing service.
Which outcome is most directly about fair value?
Products and services
Consumer support
Price and value
Consumer understanding
Checks that students can distinguish the four outcomes by function, not just by wording.
Complete the customer journey summary
Before sale, firms should design products for a clear target market and check price and value. Communications should support consumer understanding. After sale, firms must provide practical support and monitor customer outcomes.
This reinforces how the outcomes connect across the customer journey.
Misleading financial promotions
Promotions must be clear, fair and not misleading
Risks should be presented clearly, not minimised
Benefits should not be exaggerated
Customers should not be pushed into choices by pressure or confusion
Even though students asked for interactive activity, keep this slide content-based. You can verbally preview that they will later evaluate examples against these standards.
Common signs of a poor promotion
Headline returns are prominent but risks are hidden
Fees are unclear or appear late in the customer journey
Small print contradicts the main message
Urgent language pressures quick decisions
Technical language makes the real offer hard to understand
Useful phrase for students: if the overall impression is misleading, a detailed disclaimer may not save it.
Vulnerable customers
A vulnerable customer is someone who, due to their personal circumstances, is especially susceptible to harm if a firm does not act with appropriate levels of care. Vulnerability may be temporary, permanent or situational.
Keep the definition broad and practical. Avoid implying vulnerability is a fixed label attached to a person forever; circumstances can change.
Why vulnerability matters under Consumer Duty
The same process may affect customers differently
Barriers to understanding or access can create extra harm
Firms should notice when customers need different support
Good outcomes require inclusion, not one-size-fits-all treatment
Link this to the cross-cutting rules: good faith, avoiding foreseeable harm and enabling customers all become especially important for vulnerable customers.
Examples of vulnerability
Possible circumstances
Possible firm responses
Clearer explanations
Extra time
Alternative contact methods
More tailored support
Poor health
Life events
Low financial resilience
Low capability or confidence
Explain that firms should respond proportionately. The goal is not identical treatment but fair treatment that supports good outcomes.
Which warning sign makes a promotion most concerning under Consumer Duty?
Hidden risks
Unclear fees
Pressure language
Technical jargon
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Which statement best fits a vulnerable customer?
Any customer with a complaint
A customer new to banking
Someone especially susceptible to harm
Anyone paying high fees
Targets the lesson definition: vulnerability is about susceptibility to harm due to personal circumstances, and it may be temporary, permanent or situational.
How could a firm adapt support for vulnerable customers?
Expected elements: clearer explanations, extra time, alternative contact methods, accessible channels, more tailored support, and the idea that equal treatment is not always fair treatment.
Case study: Riverside Bank
Riverside Bank is a retail bank offering savings accounts, personal loans and a fee-based packaged current account. The FCA has concerns about one digital loan campaign, the value of the packaged account, and whether customer support works well for vulnerable customers.
Introduce the investigation scenario clearly. Students later act as the FCA, so establish that the bank has several products and multiple potential Consumer Duty issues rather than one isolated breach.
Riverside Bank: the promotion
Online adverts describe loans as fast, simple and stress-free
The headline monthly repayment is prominent
Total cost and important eligibility limits appear much less clearly
The campaign targets customers searching for urgent money help
This is designed to connect with the consumer understanding outcome and misleading promotions. You can ask students to notice what impression the advert gives before they evaluate the detail.
Riverside Bank: price and value
The packaged current account charges a monthly fee
Included benefits are used by only a small share of customers
Some customers could obtain similar benefits separately at lower cost
The bank has limited evidence that the account offers fair value to its target market
Keep students anchored to Outcome 2: price and value. The issue is not the existence of a fee, but whether the overall proposition is fair value for the intended customers.
Riverside Bank: consumer support
Telephone waiting times are long at busy periods
Customers trying to cancel the packaged account face several transfer steps
Webchat is not available in the evening
Staff record vulnerability inconsistently, so support is uneven
This slide gives concrete support issues. Students should see that friction and inconsistency can breach Consumer Duty even without deliberate mistreatment.
An FCA investigation view
What the FCA might ask
Customer outcomes
Management information
Product reviews
Customer journey evidence
What the FCA would look for
Who is the target market?
Is the value fair?
Do customers understand key points?
Are vulnerable customers supported?
You can explain management information as the firm's internal data: complaints, drop-off points, call times, cancellation rates, customer understanding testing and outcome monitoring.
Applying the cross-cutting rules
Good faith: are customers being treated openly and fairly?
Foreseeable harm: could the bank predict harm from its advert, fees or support failures?
Enable and support: can customers understand options and act without unreasonable barriers?
This is the bridge from the facts of Riverside Bank to a regulatory judgement. Encourage students to test each issue against all three rules, not only one outcome.
Possible FCA findings on Riverside Bank
The loan promotion may not support proper consumer understanding
The packaged account may raise fair value concerns
Support processes may create foreseeable harm, especially for vulnerable customers
Weak monitoring could suggest the bank is not delivering good outcomes consistently
Present these as reasoned provisional findings rather than proven breaches. The FCA would normally expect evidence before deciding on supervisory or enforcement action.
Model answer: misleading promotion
A strong FCA-style answer would say that Riverside Bank's loan advert may breach Consumer Duty because the overall message highlights ease and affordability while giving less prominence to total cost, risks and limits. That creates a risk that customers, especially those in urgent need, make decisions without proper understanding.
Use this as a model paragraph students can imitate: identify the issue, connect it to the relevant outcome and cross-cutting rules, then explain the likely customer harm.
Model answer: vulnerable customers
A strong answer would explain that Riverside Bank's long waits, inconsistent recording of vulnerability and limited access channels may fail to support vulnerable customers effectively. Under Consumer Duty, the bank should adapt support where needed so that vulnerable customers can pursue their financial objectives without avoidable barriers.
Emphasise that the answer should not simply say 'vulnerable customers need help'. It should identify the practical failures and connect them to Outcome 4 and the cross-cutting rules.
Model answer: overall judgement
Overall, Riverside Bank shows possible weaknesses in consumer understanding, price and value and consumer support. The pattern suggests foreseeable harm and insufficient support for customers, which means the bank may not be acting to deliver good outcomes for retail customers.
This final model answer synthesises across outcomes. Point out that strong finance answers move from evidence to judgement using the correct FCA language.
Which Riverside issue best fits the consumer understanding outcome?
Long phone waits
Weak value evidence
Uneven vulnerability records
Less clear total cost
The distractors map to other Riverside concerns: support, value and vulnerability handling. The correct answer points to the promotion's lack of clarity about total cost and limits.
Complete the FCA-style judgement
Riverside Bank's loan advert may weaken consumer understanding because the headline message is more prominent than the total cost and key limits. The packaged account may also raise fair value concerns, while support barriers may cause foreseeable harm.
Echoes the model answers and final judgement slides, helping students rehearse FCA language.
Which Riverside concern would you investigate first, and why?
Expected elements: students should choose one concern and justify it with Consumer Duty language, for example misleading promotion/consumer understanding, poor value, support barriers, foreseeable harm, or failures affecting vulnerable customers.
What is one idea from today that will stay with you?
Reflection only. Invite students to name one concept, rule, outcome or case-study insight they will remember.
What helped you understand Consumer Duty best today?
Reflection only. Encourage students to think about which activity or explanation supported their understanding most effectively.
Which part of this lesson still feels hardest?
Reflection only. Use answers to identify misconceptions or topics to revisit, such as cross-cutting rules, fair value or vulnerable customers.
Official FCA guidance
FG22/5 Finalised Guidance on the Consumer Duty
PRIN 2A in the FCA Handbook
FCA guidance on fair value
FCA material on the treatment of vulnerable customers
FCA rules and guidance on financial promotions
If sharing links separately, direct students to the FCA website and handbook search. Keep the references official and current rather than using third-party summaries.
Glossary
FCA - The Financial Conduct Authority, the UK regulator responsible for conduct in financial services
Consumer Duty - FCA framework requiring firms to act to deliver good outcomes for retail customers
retail customer - An individual or customer group receiving services outside a professional or wholesale context
good faith - Honest, fair and open treatment of customers
foreseeable harm - Harm a firm could reasonably predict and should work to prevent
fair value - A reasonable relationship between the price paid and the benefits received
financial promotion - A communication that invites or encourages a customer to engage in financial activity
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Glossary
consumer understanding - Whether communications help customers make effective, timely and informed decisions
consumer support - The help a firm provides so customers can use products, ask for help, complain or leave without unreasonable barriers
target market - The group of customers a product or service is designed to meet the needs of
vulnerable customer - A customer especially susceptible to harm because of personal circumstances
outcome monitoring - Checking evidence and data to see whether customers are receiving good outcomes
management information - Internal firm data used to monitor performance, risks and customer outcomes
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