What firms and customers can expect from the consumer duty and other regulatory reforms

Speech by Sheldon Mills, Executive Director, Consumers and Competition, delivered at the Consumer Protection in Financial Services Summit. 

Speaker: Sheldon Mills, Executive Director, Consumers and Competition
Event: Consumer Protection in Financial Services Summit
Delivered: 29 September 2022
Note: this is the speech as drafted and may differ from the delivered version


  • Consumer Duty is a significant shift, both for firms and for us at the FCA. It is also an opportunity. The Duty provides a fairer basis for competition and the flexibility of an outcomes-focused, rather than prescriptive, approach. It will provide a boost to growth and innovation. 
  • The Consumer Duty comes at a challenging time for consumers and the wider economy.  While the duty is not yet in force, firms should be stepping up now to support customers in these straitened times and ensure customers get good outcomes. 
  • Boards and senior management have a critical role in overseeing firms’ implementation of the Duty. We are committed to working closely with industry during the implementation period and beyond to get this right. 

Loyalty from the start

I remember the day I opened my first bank account. I was 6 or 7 years old, visiting my local branch with my grandmother. I was given a calculator, ruler, notepad and pencil. I used the notepad to record how much of my pocket money I loaned to my uncle and, of course, the interest I would charge him!

I remain faithful to that bank to this day, even though I have used other banks for other products and services.  

So why is that small boy’s story with his now passed, but not forgotten, Gran relevant to the Consumer Duty? Well, it’s a great example of a good consumer journey. It met my grandmother’s need to start me saving at a young age. And it made a young customer feel great and excited!  

We want every interaction with financial services to be like this. Consumers should come away satisfied and confident; their needs met and understanding the product or service they’ve got. And with a ruler, calculator, notepad and pen, of course…  

Little did I know at that point I would wind up at a financial regulator supervising the very same firm.

There you go, trust and loyalty aren’t so difficult to get. But they can be eroded. Our own Financial Lives survey shows just over a third of consumers (36%) saw financial firms as honest and transparent in their dealings with them. 

The Consumer Duty helps build a trusted financial service industry which achieves good outcomes for people and small business. Ultimately, confident consumers and businesses contribute to productivity and growth in the UK economy.  

This is essential now more than ever because families up and down the country are struggling with their finances or thinking about how to best manage them. We want to take the spirit and intent of the Consumer Duty towards the Cost of Living challenge.  

We want our great world-leading financial services industry to harness data and digital technology to support those families as we go through this macroeconomic shift. And we are already – as I will set out – working with industry to ensure that this happens.

What the Consumer Duty means for firms

The Consumer Duty is at the heart of our work to make financial services work well for all consumers up and down the country.

Be in no doubt: the Duty will be a significant shift in what we expect of firms. It means making lasting changes to culture and behaviour to consistently deliver good outcomes. 

It means putting customers in a position where they can make informed decisions; where they are presented with suitable products and services for their individual needs; and where they receive fair value for those purchases. The duty will require all firms, whether designing, selling or advising on products and services, to put their customers’ needs first. 

Trust and confidence in financial services is key and achieving good outcomes for consumers will help do this. I worked closely with many firms during the pandemic and really saw the industry pull together to support consumers, businesses, and the wider economy. We began to see the trust growing. The new Consumer Duty will help build on this. And this ultimately benefits businesses, the economy and growth and productivity.  

We recognise the efforts that firms are making to implement the changes required to meet our requirements under the Duty. We have listened to your feedback and extended the implementation deadline to ensure we get this right. This doesn’t mean meeting the deadline will be easy, but we believe the benefits are more important now than ever given the macroeconomic pressures we all face.  

To remind you of what we expect the industry’s efforts will deliver:

1. Consumer Understanding. We would expect products to come with timely and clear information that customers can understand so they can make informed financial decisions. Customers are making complex choices about debt, mortgages, pensions, investments, and other products, often on a smartphone. It’s more important than ever to ensure they have the key product information, such as its features and charges, easily accessible and understandable.  This is about the consumer journey, the digital user experience as well as the disclosure of contract terms.

2. Products and Services. Firms should be offering customers products that meet their needs, rather than pushing products that aren’t suitable or needed. We all think about Payment protection insurance as a historic example of this. But this isn’t a historic issue. We see consumers being pushed into high risk investments, unaffordable high cost credit and unsuitable debt products that do not meet their needs.  

3. Consumer support. When it comes to customer services many of us have experienced long call-waiting times and reduced access to in-person services such as bank branches. I’ve certainly raged at a Chatbot before but I’ve also had experiences where it was really helpful in solving problems quickly. Ultimately, your customers want their problems solved quickly and effectively. They want to receive support that meet their diverse needs. We expect firms to ensure customers are supported throughout their relationship with them and consider the best ways to engage including digital or non digital. 

We appreciate that firms don’t like losing customers. But we want to see competitive markets, where it is as easy to switch, cancel or complain about a product as it is to buy it in the first place. This is especially important now, when every penny counts for many people. As a result, we expect firms to ensure any exit fees are reasonable.   

4. Price and value. We expect consumers to receive fair value. Our intention is not to set prices and our rules don’t have this effect. But we expect firms to satisfy themselves that the prices they charge are reasonable for the benefits. For example, a firm lending to customers with high credit risks would need to satisfy themselves that any high charges have a reasonable relationship with the benefits for the customer.

Change from the top

All of these outcomes are vital to achieving the ambition of the Duty. However, change won’t be possible unless driven from the top with strong senior championing and oversight. 

Boards and senior management have a critical role in overseeing firms’ implementation of the Duty. That’s why we have strengthened the requirements around governance and accountability to ensure senior managers and executives are held accountable.

Time is ticking on. The first implementation milestone is barely a month away by the end of October.

We do not expect firms to have necessarily fully scoped all work required to embed the Duty by the October deadline, but firms plans’ should be sufficiently developed to provide their governing bodies and us with assurance that the Duty will be fully implemented for new and existing products by next July.

We also expect boards to have an ongoing role overseeing these plans and ensure they remain on track. 

The Duty provides a real opportunity, in the longer term, to move towards a more flexible and less prescriptive regulatory framework. We envisage fewer rule changes as a result, which should lower compliance costs to firms. And in so doing so, provide a boost to growth and innovation.

It will provide a focus on competition in the interests of consumers and support future innovation by being clear about the standards required, whatever the product. 

Evolution of a regulator

Another question we are hearing from industry is what supervision of the consumer duty will look like? 

While our core supervision activities will remain, our approach will evolve. 

The data we collect will be focused more on consumer outcomes and we will be looking at the whole product life cycle. We will be seeking evidence from firms of what consumer outcomes are being achieved, and how firms are assuring themselves that they are meeting these outcomes.

Just as we demand firms focus on their customer service, we at the FCA are driving hard to become more operationally efficient and service oriented.  

With 95 new colleagues in our Authorisations team and new automation and technology tools, our pending caseload has fallen by 40%. We’ve also increased rigour in our decision making.

Over time, we expect faster, better decisions will support us in bringing down the costs of the regulatory system. 

And we expect to be marked on our success over time and held accountable for our performance once the reforms have had time to bed in. We have published clear outcomes and metrics against which we will be measuring and reporting on our progress as part of our Strategy.

Supporting growth

High standards, enforced effectively, are necessary for healthy competition and innovation in consumers’ interests. This is embodied across Our Strategy – in our commitment to reducing and preventing serious harm, setting and testing higher standards, and promoting competition and positive change. 

Our work across consumers and wholesale markets will boost the key drivers of international competitiveness and growth of the UK economy. These are effective competition, increased productivity, and innovation. 

Sarah Pritchard, our Executive Director of Markets gave a speech on our wholesale markets work and how it supports growth and competitiveness. LINK

Our work on consumers also goes towards this aim and will boost confidence by setting the standards for effective competition. 

Good consumer outcomes and a focus on the consumer proposition should be commercially positive, attracting new business to firms and supporting growth domestically and globally, and we expect firms, as well as consumers, to benefit from the Duty.

For example, increased consumer trust and healthier competition would support innovation and encourage new entrants to the market, with firms competing to drive up quality for consumers. This will benefit the UK financial services industry and the high standards will ensure that firms seek to establish themselves in the UK and can export services outside it in the global financial services system.
How will the Duty do this?

Promoting competition

The Duty will promote competition based on merit with firms competing and innovating to attract and retain customers based on the quality of their products and services and the value they can deliver, rather than relying on inertia or behavioural traps.

It will strengthen the tools we have to tackle harmful practices, including those that take advantage of people’s behavioural biases. We’ve seen many examples of complex products being pushed to people who don’t understand or need them, whether that’s PPI or packaged bank accounts, or complex, high-risk investment products.

We face savings and investments challenges in this country. Our research found that over half of consumers with more than £10,000 of investible assets hold the majority or all of this in cash.  We want to encourage people to make sensible investments that will support their life choices, retirements and the economy.  

Trust in financial services, will be aided by the consumer duty. Reforms we will make to the financial services regime as we move to implement the Future Regulatory Framework will help support this too.

In turn, this stimulates investment and growth in financial services and supports growth in the wider UK economy.

Cost of living

Rising rates mean that consumers will face challenges around debt, mortgage rates, where to save, choices on investments or pensions and will need help and support and good customer service to navigate those choices and support their families.

While the duty is not yet in force, firms should be stepping up now to support customers in these straitened times.

Our own data shows that in May over 9 million people were over-indebted and finding it a heavy burden to keep up with household bills. This is up by over 2 million since 2020. 

The rising cost of living underlines the importance of outcomes we would expect under the Duty.

We’ve told lenders that we expect them to support struggling customers, particularly as they have the data to spot the warning signs first. 

We have identified 30 firms that need to do more to help struggling customers and will investigate the activities of 40 more. 

While we will intervene where we see bad practice, I know that the majority are doing the right thing and we’ve seen positive examples of banks and lenders who are contacting customers who they can see might be struggling. 

They are providing online budgeting tools, following our Tailored Support Guidance on forbearance and referring customers to independent debt advice, where appropriate. We know that there are options for people to access credit which sit outside our perimeter. We are not complacent and, ahead of us formally regulating Buy Now Pay Later firms, we’ve met with them to ask them what more they can do to support struggling customers and we’ve warned them about misleading ads.  

It is more critical than ever that borrowers and savers are offered fair and competitive rates. Over 2 million people on variable rate mortgages are seeing immediate increases to their borrowing costs. Some 3.2 million customers have fixed rate deals that are due to expire in the next two years. 

We’ve told mortgage lenders that they need to do more to help borrowers switch to a less costly option where that is available. We know, however, that there are upward pressures on mortgage rates and some products have been removed in the past week. We are monitoring developments closely and will be working with industry to ensure that consumers are treated fairly during this period.

And for savers, we expect banks to be transparent and be able to explain clearly to us how they decide on the pace at which they pass on base rate increases to savers for both easy access and fixed term deposits. We are meeting with the major high street banks to ensure they are taking appropriate steps to help consumers.

Our key message for consumers is to shop around to get the best possible deal. If a consumer is facing difficulties repaying their mortgage or other credit, they should contact their lender as soon as possible.

We have written to insurance firms asking them to support access to insurance products and ensure claims are handled fairly and promptly. 

For many struggling with their finances, insurance products for home, motor and pets and other items can be essential if things go wrong. We’ve asked insurers to ensure that premium finance arrangements represent fair value – which often are used by those in financial difficulty, and also to make clear any additional costs.

We also know scammers will be trying to take advantage at this time. We’re already running a ScamSmart campaign to warn consumers to be on their guard against scammers offering a loan in return for an advance fee. And we will shortly be launching the next phase of our pension scams campaign.  

We are being more assertive and agile in how we detect, disrupt and take action against scammers. We are scanning on average 100,000 websites created every day to identify newly registered domains that show the characteristics of a scam.

We continue to play our part and look for joined up solutions – because financial service products form just a part of the household bills. With partner regulators and debt advice charities we are driving forward work through the UK Regulators Network to ensure consumers can access the support they need across sectors including energy, water, and financial services, as a first step.

We want to make that experience more consistent across sectors, so they get the help they need and improve their longer term outcomes. We know that being in debt brings a huge mental burden, so we want to make that journey work better for consumers.

A win for firms, consumers and the economy

The Consumer Duty comes at a challenging time for consumers and the wider economy. And it represents a significant shift, both for firms and us at the FCA. We’re committed to working closely with industry to get this right.

Selling suitable products at a fair price, providing good standards of customer service and communications people can understand shouldn’t be controversial. 

And the shift to outcomes-based regulation offers an opportunity to move towards a less prescriptive and more flexible regulatory framework. And this should mean fewer new rules in the future. 

But firms need to put in the effort now, to make sure we need fewer retrospective regulations in future. 

Ultimately, when we get this right, we all win: consumers – who will get the right products and services at the price that is fair; firms, who will retain customers and attract new ones; regulators – who will need to step in less often - and most importantly, the wider economy.