The Financial Conduct Authority (FCA) has recently published key documents that shape the regulatory landscape. These include the feedback statement FS25/2, which addresses action plans for reviewing Consumer Duty requirements, and a correspondence letter outlining the FCA’s new approach to supporting growth in financial services. These publications highlight the evolving expectations for firms, emphasising the need for enhanced consumer protection while balancing market growth.
Consumer Duty Action Plans and Key Findings
The FCA’s Consumer Duty framework sets higher expectations for firms to deliver good outcomes for retail customers. The recently published FS25/2 feedback statement reviews action plans submitted by firms and assesses how well they align with the Consumer Duty’s overarching principles.
One of the key takeaways from the FCA’s review is that while firms have made progress in implementing Consumer Duty standards, there are still notable gaps. Many firms need to further refine their approaches to governance, product oversight, and customer communication. The FCA emphasises that firms must embed Consumer Duty into their culture rather than treating it as a compliance exercise. For consumer credit firms, this means enhancing affordability assessments, ensuring fair value in lending products, and improving support for vulnerable customers.
Additionally, the feedback statement underscores the importance of robust data collection and monitoring to assess whether consumer outcomes meet regulatory expectations. The FCA expects firms to use data-driven insights to identify potential harms and proactively address them.
Supporting Growth While Ensuring Compliance
Alongside the Consumer Duty review, the FCA has also outlined its new approach to supporting growth in financial services, detailed in a recent correspondence letter to the Prime Minister. This initiative seeks to create a regulatory environment that fosters innovation and competition while maintaining high consumer protection standards.
The FCA’s stance suggests a more proportionate and risk-based regulatory approach. The letter indicates that the FCA is looking to streamline processes for new market entrants and reduce unnecessary regulatory burdens for firms that demonstrate strong compliance track records. This could mean more flexible supervisory engagements and targeted interventions rather than blanket regulations.
However, firms should not interpret this as a relaxation of standards. The FCA has made it clear that its primary focus remains on protecting consumers from financial harm. Consumer credit firms must continue demonstrating responsible lending practices and ensuring that products meet the needs of their target customers.
Key Considerations for Consumer Credit Firms
- Embed Consumer Duty at Every Level: Firms must integrate Consumer Duty principles into their operations, governance, and corporate culture.
- Enhance Data-Driven Decision Making: Robust monitoring frameworks are necessary to track consumer outcomes and address emerging risks.
- Adapt to a Proportionate Regulatory Approach: While the FCA aims to support growth, firms must remain diligent in meeting compliance expectations.
- Focus on Fair Value and Transparency: Credit products should be designed to offer genuine value, with clear and accessible customer communications.
- Proactively Support Vulnerable Customers: Firms need to strengthen their approach to identifying and assisting customers in financial difficulty.
The FCA’s latest publications reinforce its dual commitment to consumer protection and market growth. Consumer credit firms must take proactive steps to enhance their Consumer Duty strategies while leveraging regulatory developments that support innovation. By aligning with the FCA’s expectations, firms can navigate the evolving landscape with confidence, ensuring both compliance and long-term success in the market.
