Two Years In: Where Do Firms Stand?
Consumer Duty (PS22/9) represented the most significant overhaul of FCA conduct regulation in a generation. The core obligation is straightforward in concept but demanding in practice: firms must act to deliver good outcomes for retail customers across four outcome areas — products and services, price and value, consumer understanding, and consumer support. The "good outcomes" standard is an objective test, not a process or documentation standard.
By September 2025, most regulated firms have completed their initial implementation programmes. They have policies, fair value frameworks, outcome monitoring dashboards and Consumer Duty board reports. The governance infrastructure is largely in place. The FCA's feedback, delivered through its post-implementation review, Dear CEO letters and thematic work, is that the infrastructure often looks appropriate but the underlying substance is frequently absent. Having a fair value framework does not demonstrate fair value; having a vulnerable customer policy does not demonstrate that vulnerable customers receive appropriate outcomes.
The distinction matters enormously from a financial risk perspective. A firm that has invested significant resource in creating Consumer Duty documentation but has not materially changed its product economics, pricing or customer service operating model has not reduced its regulatory risk. It has created a paper trail that an enforcement team can use to demonstrate that management was aware of the obligation and chose not to act on it.
What the FCA Has Found: Persistent Shortfalls
The FCA's implementation review and subsequent Dear CEO letters identify four areas where firms are most persistently falling short. CFOs should assess their own exposure in each area.
Outcomes Monitoring
The Duty requires firms to monitor the outcomes their customers are actually achieving, not the outputs of the firm's processes. The FCA has found that most firms have established metrics, but those metrics tend to measure inputs (complaint response times, call answer rates) rather than outcomes (whether customers understood the product before purchasing, whether customers in financial difficulty are accessing appropriate support). The FCA wants to see firms linking their monitoring data to evidence of customer wellbeing, not just to operational performance measures.
Fair Value Assessments
Fair value requires firms to demonstrate that the price charged for a product is reasonable relative to the benefit delivered. The FCA has found that many fair value assessments are formulaic documents that assert value rather than demonstrating it. Common weaknesses include: failure to assess value from the customer's perspective (rather than the firm's); inadequate consideration of whether target market customers are actually receiving the benefits they are paying for; and an absence of any mechanism to trigger a product review or repricing where the assessment identifies poor value.
From a financial perspective, a genuine fair value assessment may require product repricing downward, which has a direct P&L impact. This is not a compliance issue that can be managed entirely by the compliance team — it requires CFO involvement because any decision to adjust pricing has revenue implications that must be modelled and planned for.
Vulnerable Customers
The FCA's vulnerable customer expectations are detailed and, in the assessment of the implementation review, widely unmet. Firms are expected to identify customers who may be in vulnerable circumstances, adapt their service to those customers' needs, and monitor whether the adapted service is actually delivering better outcomes. The FCA has found that identification mechanisms are generally weak, adaptation is inconsistent, and monitoring of outcomes for vulnerable customers is almost universally inadequate.
Complaints Handling
The FCA expects Consumer Duty to change how firms approach complaints: not just as a process to resolve individual grievances, but as a data source that should be analysed for patterns indicating systemic poor outcomes. Firms that have high complaint volumes in a particular product area or customer segment should be treating those complaints as a signal of a potential Consumer Duty issue, not just an operational problem to be managed down. The FCA has found that complaint data is frequently not integrated into the Consumer Duty outcomes monitoring framework.
Enforcement: The Financial Stakes
As of September 2025, the FCA has not yet announced major Consumer Duty enforcement cases. This is entirely consistent with how the FCA typically approaches major new regulatory frameworks: it gives the industry time to implement, issues guidance and Dear CEO letters to signal its expectations, and then begins enforcement once it considers that firms have had sufficient opportunity to comply. The pattern seen with the Senior Managers and Certification Regime, the Mortgage Market Review and the Retail Distribution Review all followed this trajectory.
The Dear CEO letters published in 2024 and 2025 have been increasingly direct in stating that the FCA is not satisfied with the pace of progress on outcomes monitoring, fair value and vulnerable customers. This signalling is a reliable precursor to supervisory intervention and enforcement. CFOs should plan on the basis that material enforcement action in the Consumer Duty space is likely in the period 2025 to 2027.
The financial implications of enforcement are not limited to fines. The FCA has the power to require firms to provide redress to customers who have suffered poor outcomes. For a firm with a large customer base and a fair value failing that has persisted across multiple product years, the redress liability could be substantial. The FCA also has the power to require product withdrawal and retrospective repricing, which can have balance sheet implications that dwarf any regulatory fine.
"The greatest financial risk in the Consumer Duty space is not the FCA fine. It is the redress liability that accrues when a fair value failing persists unremedied across a large customer base and multiple product years."
Financial Implications for the CFO
The CFO's engagement with Consumer Duty should go well beyond approving the compliance budget and signing off the annual board report. There are three specific financial risk areas that require active CFO attention.
Provisions for Potential Redress
Where a firm's fair value assessment identifies a product that may not represent fair value, or where complaints data suggests systemic poor outcomes, the CFO should consider whether a provision is required under IAS 37. The provision criteria are: a present obligation arising from a past event; a probable outflow of economic resources; and a reliable estimate of the amount. If there is a credible basis for concluding that a product has not delivered fair value to a class of customers, the three criteria may all be met before any enforcement action is taken. Waiting for the FCA to act before making a provision is not prudent; the provision obligation arises when the firm becomes aware of the exposure, not when the regulator acts.
Product Repricing Implications
Where a genuine fair value assessment identifies that a product is overpriced relative to the benefit delivered, the firm has an obligation to remedy this. Repricing downward has a direct revenue impact that must be modelled. The CFO should work with the product and compliance teams to understand the timeline for any required repricing, the revenue impact in the repricing year and subsequent years, and whether the product can be made economically viable at a lower price point or should be discontinued.
Cost of Enhanced Monitoring
Building the genuine outcomes monitoring capability that the FCA expects is not costless. It requires investment in data infrastructure, analytical capability, and customer research. The CFO should ensure that the compliance budget reflects the true cost of meaningful Consumer Duty compliance, not the cost of maintaining the documentation infrastructure. Firms that are underfunding genuine compliance in order to protect short-term profitability are accumulating a regulatory liability that will be more expensive to resolve later.
What the Annual Board Report Must Contain
The Consumer Duty rules require the board to review and approve an annual Consumer Duty report. The FCA has been explicit that this report must not be a generic compliance attestation; it must provide the board with substantive evidence of customer outcomes and a credible assessment of whether those outcomes are good.
Key Takeaways
- Consumer Duty is over two years into operation. The FCA's post-implementation findings show governance is in place but outcomes monitoring, fair value and vulnerable customer workstreams are systematically weak across the industry.
- Enforcement action is signalled for the 2025 to 2027 period. Firms should plan their compliance programmes on this basis, not on the assumption that the current supervisory patience will continue.
- The largest financial risk is not fines but redress: a fair value failing across a large customer base and multiple product years can create a redress liability that materially exceeds the regulatory penalty.
- IAS 37 provisions may be required where a firm's own fair value assessment identifies that a product has not delivered fair value, before any FCA action is taken. The CFO must assess this independently of the compliance team.
- Repricing decisions resulting from genuine fair value assessments are a CFO-level decision, not a compliance one. The revenue impact must be modelled and planned for.
- The annual Consumer Duty board report must contain substantive outcomes data, a genuine fair value assessment, and a financial risk section prepared by the CFO. A document that asserts compliance without evidencing it creates more risk than it mitigates.
- Board members have personal accountability under SMCR for the quality of Consumer Duty governance. The standard expected is genuine oversight, not ceremonial approval.
