Approaching Two Years On: The Impact of the Consumer Duty on Financial Services

Since its introduction, the FCA’s Consumer Duty has marked a significant shift in how financial firms operate. While officially implemented in 2022, the ripple effects across 2023 and into 2025 have been considerable, particularly with the July 2024 deadline for closed book products. The duty goes beyond regulatory box-ticking: it demands tangible, measurable improvements in customer outcomes.

What is the Consumer Duty?

At its core, the duty revolves around one central principle: delivering good outcomes for retail customers. This is supported by three cross-cutting rules:

• Act in good faith toward retail customers.
• Avoid foreseeable harm.
• Enable customers to pursue their financial objectives.

Firms are also expected to align with four outcomes:

• Communications must be understandable.
• Products and services should meet customer needs.
• Fair value must be offered.
• Support should be timely and appropriate.

Key developments in 2024 and 2025

Johnson, Hopcraft and Wrench case

One of the most seismic events affecting the Consumer Duty framework was the Johnson, Hopcraft and Wrench case. Though initially thought to affect only credit broking, its impact has widened considerably across all financial services. This case even caught the attention of the Supreme Court and prompted governmental concern over whether regulation may be stifling growth.

Claims management industry and costs

The growth of the claims management sector has created additional financial and reputational risk for lenders. In response, the Financial Ombudsman Service (FOS) increased the fees firms must pay when faced with complaints, aiming to reduce vexatious claims.

Joint debt collection guidance

In March 2024, the FCA published joint guidance with Ofgem, Ofwat and Ofcom, with the focus being on respectful communication, fewer intrusive calls, clear signposting to free debt advice, and easier third-party engagement on behalf of consumers.

Closed book reviews

By July 2024, firms needed to complete reviews of closed books. We saw excellent examples of good practice, with organisations proactively writing off debt or adjusting interest to better support vulnerable customers.

Product sales data (PSD) and management information (MI) reporting

The FCA introduced new reporting rules in April 2024, demanding granular insight into customer outcomes. The key message was that ‘data is not enough’; firms must interpret and act on it.

Sector focus: retail banking and insurance

Retail banks are now expected to handle bereavement, incapacity, and disengaged customers with greater sensitivity, meaning bereavement policies have become essential. Meanwhile, insurers were selected for initial reviews because of their structural consistency, not because of poor performance.

What are firms doing well?

There are a number of things that firms have done particularly well over the past year:

• Reviewing and reshaping communications to ensure clarity.
• Tailoring products and support for vulnerable customers.
• Taking proactive steps such as waiving interest or restructuring agreements.

Creating Consumer Duty Boards and implementing meaningful data reviews.

Areas for improvement

Although we have seen significant improvements in some areas, there are still issues that need addressing:

• Too much focus on process over outcome.
• Inaccessible post-sale support compared to pre-sale experiences.
• Lack of training or empowerment for staff handling vulnerable clients.

Vulnerability and debt collection

Vulnerability is now a central concern. The FCA has stated that up to 56% of customers may experience some form of vulnerability. Mismanaging this can result in significant fines, as seen with VW Financial Services. Firms must strike a balance between recovery and humanity, avoiding excessive litigation and working collaboratively with debtors.

Using the right data the right way

Simply collecting management information is not enough; the FCA expects firms to understand, discuss and act on what the data reveals. Governance teams must ensure consumer outcomes improve based on clear insight, not compliance for its own sake.

Preparing for what comes next

As we look ahead, firms must accept that consumer duty is not a one-time compliance exercise – it is a continuous journey. The FCA has made it abundantly clear that it expects firms to embed the duty into their organisational culture, governance structures and day-to-day operations. But what does that look like in practice?

• Reassess product offerings and closed books.
• Scrutinise complaints trends.
• Review permissions you are not actively using.
• Build clear MI dashboards that link back to fair value and outcomes.

How we can help

The consumer duty is not a one-off compliance task. It represents a shift in culture and mindset. Encouragingly, many firms are not only meeting expectations but exceeding them through transparency, compassion, and innovation. Still, the road ahead requires vigilance, proactivity, and a willingness to adapt.

Contact us to find out how we can support your next steps toward regulatory confidence and consumer trust.