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The FCA's new Consumer Duty: How should financial services respond?


The Financial Conduct Authority's new Consumer Duty will lead to a major shift in financial services, and how firms should provide consumers with finance products. In the first of three posts on how retail finance firms should respond, Graham Hill examines their options.

27th Sep 2022
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The FCA has published a new Consumer Duty setting out the standard of care retail finance firms must provide consumers. Firms only have a year to comply with its complicated requirements. 

In a nutshell…

In July this year, after a period of consultation with the retail finance industry and interested parties, the FCA published its Finalised Guidance on the new Consumer Duty (here is a link to the document and the consultation). The Guidance describes the standard of care that retail finance firms should provide consumers. 

Through the Guidance, the FCA describes how firms should provide consumers with finance products, operate their go-to-market processes and manage problems, such that harms are minimised, in a reasonable way. 

Retail finance firms have until July 2023 to comply with its requirements.

Further details…

Retail finance firms have a number of options when it comes to responding to the 121 pages of principles, rules and outcomes described in the new Consumer Duty. 

At one extreme, firms could take a RETRENCHMENT approach. 

In this approach, they confirm that the changes they already made in response to e.g. the FCA’s earlier ‘Guidance for firms on the fair treatment of vulnerable consumers' and the 'Senior Managers and Certification Regime', are adequate to meet the new Consumer Duty. 

Although I don’t think this is likely, there may be firms that believe they already meet the requirements of the new Consumer Duty.

At the other extreme, firms could take a RENEWAL approach. 

In this approach, they carry out a root and branch review of their current products from the consumer's perspective, improve any products that likely do not meet the new Consumer Duty and create new products specifically designed to meet consumers needs and expectations aligned with the new Consumer Duty.

Although some firms may take this approach, the cost and complexity of applying consumer-driven innovation mean that it is not all that likely.

Between the two extremes, firms could take a REVIEW approach.

In this approach, they review their current products, go-to-market processes and problem solving from a regulatory perspective and improve them where they likely do not meet the new Consumer Duty.

I believe this is much more likely than the other two options, although I expect some firms to leave it until late before responding and to struggle to meet the deadline.

Three key takeaways…

  1. If you are a retail finance firm you need to respond to the FCA’s new Consumer Duty by July 2023. Read the Finalised Guidance and related documents to inform yourself about what is expected.
  2. Identify which of the three options – Retrenchment, Renewal or Review – or a hybrid, is the right approach for you. 
  3. Pull together a cross-functional team to start planning your response. Unless you are taking a Retrenchment approach, make sure a business-facing function is leading it, not Compliance or Legal.

In the next post, I will look at the seven steps financial services firms should take to review and respond to the FCA’s new Consumer Duty.

Other articles in this series:




Replies (6)

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Dr. Graham Hill
By Dr. Graham Hill
27th Sep 2022 09:32

For further details of the FCA’s ‘Finalised Guidance FG22/5 Final non-Handbook Guidance for firms on the Consumer Duty’ see

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Dr. Graham Hill
By Dr. Graham Hill
27th Sep 2022 09:32

For further details of the FCA’s ‘FS19/2 A duty of care and potential alternative approaches: summary of responses and next steps’, which summarises the initial response from retail finance firms and other interested parties to the earlier consultation, see

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Dr. Graham Hill
By Dr. Graham Hill
28th Sep 2022 17:08

Dan Collins, in a comment to me suggested that the most beneficial thing banks can do - and some have actively been avoiding it - is work in conjunction with the FCA or make an active effort to develop a better relationship with the governing body.

Most institutions seemingly have either an adversarial and/or look to avoid what the FCA is hoping to accomplish with whatever regulations it develops.

There are solid reasons that FS institutions continually pay billions in fines - and most of it comes from their current stance on regulators.

My response to Dan was that I think he is right.

Most retail finance firms are purely product-oriented rather than customer-oriented, no matter what their advertising says. The FCA's new Consumer Duty won't change that, (which is why I think most firms will take a Review approach), but it will force firms to look more closely at target customers, their desired outcomes and improve products, processes and problem-solving to match.

I think he is right about the relationship with the FCA too.

In the past the regulatory approach was mostly a principles-driven one. This automatically lead to friction between product-oriented firms and the FCA. And the stiff fines that go with it.

The Consumer Duty is being implemented under an outcome-driven approach, as FCA Chair, Charles Randell made clear in a speech on 'Outcomes-focussed regulation: a measure of success?' last year. This is very different. It doesn't mean that it won't lead to friction with product-oriented firms, however the (customer) outcomes demanded by the Consumer Duty mean that a pure product-orientation will become less and less viable if firms want to avoid even stiffer fines.

The writing is on the wall, or rather, in the Guidance. Firms just have to act on it.

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Dr. Graham Hill
By Dr. Graham Hill
30th Sep 2022 12:41

Ralf F Korb made an interesting observation, "WOW - a challenging topic and so little known about - would also make a cool topic for a CRMKonvos ;-)'

My response to Ralf was that the new Consumer Duty is a challenging topic. It is going to cost each retail finance firm a six or seven-figure sum, probably more, to implement properly. And the FCA and an army of external organisations will be checking that they have.

My suggestion to Ralf was that we should arrange a CRMKonvo about the role that 'outcomes', both for firms and their customers, will increasingly play in European regulation in the future.

What do you think? How would consumer regulation change under an outcomes-focus, rather than under today's principles-focus?

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Dr. Graham Hill
By Dr. Graham Hill
02nd Oct 2022 11:50

David Titterton, raised an interesting point in a message to me when he said "IMO many firms need to look at more of a hybrid review/renew, to meet requirements in shorter term but improve competitiveness and viability over longer term."

My response to Davis is that in principle I agree with him. Rather than just reviewing products, processes and problem solving, and make any required improvements to comply with the Consumer Duty, it makes more economic sense to use the review as a catalyst to renew them instead.

A Review is a costly exercise. It will cost most retail finance firms a six-seven figure sum to comply. If there is no return other than avoiding fines, the money will have been largely wasted. It is only when the review goes beyond just reviewing, to renewal, that the firms will start to earn a return.
My working assumption from having been deeply involved in implementing legislation before, e.g. MiFID and GDPR, is that firms will respond too-late, will do the minimum to comply and will run the work from Compliance/Legal, hence the Review option.

How to earn a decent return from complying with the Consumer duty is the topic of my final post on this short how-to series.

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Dr. Graham Hill
By Dr. Graham Hill
05th Oct 2022 11:22

If you want to delve into the steps of the Review in more detail - to look at each step's purpose, the key activities and the deliverables - download the white paper on the 'FCA New Consumer Duty: Options, Steps, Activities and Developing a Market Orientation' at

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