FCA proposes Consumer Duty scope changes

The Financial Conduct Authority has opened a consultation on targeted changes to the Consumer Duty, seeking to give regulated financial services companies clearer boundaries on where the regime applies and how proportionality should be judged.

The consultation, CP26/23, proposes changes to the Duty’s scope across wholesale activity, complex distribution chains, retail business involving non-UK customers, and the interaction between the Duty and other product governance rules. The regulator is also consulting on related guidance intended to reduce uncertainty where several companies sit between product design and the end customer.

Under the proposals, business with non-UK customers would be removed from the Duty’s scope. The FCA is also seeking to clarify when the Duty applies to companies in distribution chains, when companies can rely on each other, and how evidence and board reporting should be proportionate to actual customer risk.

The regulator said the changes are intended to “reduce unnecessary cost and complexity while preserving strong protections for retail customers”. The consultation closes on 18 September 2026, with the FCA expecting to publish a policy statement and make any new rules in the first quarter of 2027.

The Consumer Duty came into force for open products and services in July 2023, followed by closed products and services in July 2024. It requires regulated financial services companies to act to deliver good outcomes for retail customers across products and services, price and value, consumer understanding, and consumer support.

Since implementation, the regime has become one of the central compliance frameworks in UK retail financial services. It has also created pressure across longer distribution chains where manufacturers, advisers, platforms, insurers, lenders, and intermediaries may all have some influence over customer outcomes.

Although the Duty was designed around retail customer protection, the FCA’s latest paper acknowledges that some companies have applied it more widely and more intensively than intended. That has been particularly apparent in wholesale markets and in complex chains where participants have limited or indirect influence over retail outcomes.

The proposals do not remove the central consumer protection standard. They instead attempt to draw a sharper line between activity that can materially affect retail outcomes and activity that sits outside that risk. That line has become increasingly important as regulated companies have embedded the Duty into governance, product review, distribution oversight, management information, and board reporting.

A similar concern over proportionality was visible in the regulator’s separate work on sustainability disclosure, where the FCA has sought to make climate reporting more useful and less duplicative. The same question runs through the Consumer Duty consultation: whether reporting and governance are producing better decisions, or simply adding process.

The most immediate operational effect is likely to fall on compliance teams, legal teams, product committees, and boards. The FCA has noted that some board packs appear disproportionate and has suggested companies should challenge reporting approaches that add little value. That gives regulated companies a reason to reassess whether Consumer Duty evidence, committee structures, and information requests across distribution chains are properly connected to customer outcome risk.

Wholesale businesses will examine the proposals closely. The FCA said the vast majority of wholesale market activity has no material impact on retail outcomes and sits outside the Duty’s scope. However, companies that manufacture products later distributed to retail investors, or provide information that influences retail-facing products, may still be captured in some circumstances.

International financial services activity is another core area. Removing business with non-UK customers from the Duty’s scope is intended to reduce friction for companies serving overseas clients from the UK, particularly where local regulatory regimes already apply. That change also aligns with the government’s wider pressure on regulators to support growth and competitiveness while maintaining market standards.

The difficulty will lie in implementation. Outcomes-based regulation gives companies flexibility, but it can also encourage conservative interpretation when enforcement boundaries are uncertain. Worked examples and guidance may therefore carry as much practical weight as the formal rule changes, especially for companies seeking to define responsibility across multi-party distribution arrangements.

The consultation also lands in a market already managing several regulatory shifts, including Consumer Composite Investments, sustainability disclosure, operational resilience, financial promotions scrutiny, and technology risk. A reduction in duplication would be welcomed, but financial services companies will still need to show that proportionality is supported by evidence rather than assumed.

The FCA is now trying to refine one of its most consequential post-crisis-style conduct frameworks without weakening its retail customer objective. The next test is whether the final rules can give companies enough confidence to reduce unnecessary process while preserving clear accountability for product design, distribution, value, communication, and customer support.