What the FCA Is Now Challenging in Practice
When the Consumer Duty came into force, most consumer credit firms responded with urgency. Frameworks were built, policies updated, Board papers drafted and implementation plans rolled out. One year on, however, the FCA’s focus has moved decisively beyond whether firms implemented the Duty to whether they can now prove it works.
For the Financial Conduct Authority (FCA), Consumer Duty is no longer a change programme. It is business as usual — and the regulator is increasingly sceptical of firms that rely on high-level statements, generic MI or policy-heavy approaches without tangible evidence of improved consumer outcomes.
This blog explores what the FCA is now challenging in practice, where firms are still falling short, and what good looks like as the Duty continues through its third year.
From implementation to interrogation
During the first phase of Consumer Duty, the FCA’s primary concern was whether firms had taken the regime seriously. That meant ensuring the Duty was formally embedded into governance structures, that Boards were engaged, and that firms could articulate how the four outcomes were being addressed.
That phase has now passed.
The FCA has been explicit that its supervisory approach is shifting towards testing. Supervisors are asking harder questions and looking for evidence that firms understand how their products and services perform in the real world. Firms are being challenged not on what they intended to do, but on what actually happened.
In consumer credit, this shift is particularly pronounced. The FCA continues to view the sector as higher risk, especially where customers are financially stretched, products are complex, or distribution chains are long.
Fair value: still the most misunderstood outcome
Fair value remains the area where many firms struggle most. In practice, the FCA is finding that some assessments are too static, too narrow, or too disconnected from actual customer experience.
The regulator is increasingly challenging firms that:
- Rely on pricing comparisons without assessing outcomes
- Focus on average customers while ignoring outliers
- Fail to consider broker fees, ancillary services or add-ons
- Do not revisit fair value assessments when market conditions change
In the consumer credit context, fair value is not just about interest rates. It includes the total cost of borrowing, the quality of service, the effectiveness of support when things go wrong, and whether customers genuinely benefit from the product over its lifecycle.
The FCA is clear that fair value must be evidenced through data, not assumptions.
Outcomes monitoring: MI that tells a real story
A consistent theme emerging from FCA supervision is dissatisfaction with management information. Many firms can produce dashboards, but fewer can explain what those dashboards actually mean — or how they influence decision-making.
The FCA is now challenging firms to demonstrate that MI:
- Identifies emerging harm early
- Is broken down by product, channel and customer type
- Captures the experience of vulnerable customers
- Is reviewed and challenged by senior management
- Leads to tangible actions and changes
In January and other high-stress periods, this becomes particularly important. Firms that only review MI retrospectively, or that cannot link data to outcomes, are likely to face deeper supervisory engagement.
Consumer understanding: beyond disclosure
Another area of increasing scrutiny is consumer understanding. The FCA has made it clear that simply providing information is not enough. Firms must consider whether customers actually understand what they are being offered.
In practice, the regulator is questioning:
- How firms test customer understanding
- Whether digital journeys support informed decision-making
- How complex terms, fees or conditions are explained
- Whether communications change for different customer segments
This is especially relevant for credit brokers and digital platforms, where the customer journey may involve multiple parties and automated decisioning. The FCA expects firms to take responsibility for the overall experience, not just their individual touchpoints.
Vulnerability: policy versus practice
Most firms now have vulnerability policies. What the FCA is finding, however, is that implementation often lags behind intention.
Supervisors are increasingly testing:
- How vulnerability is identified in practice
- Whether staff are confident and empowered to act
- How digital channels capture vulnerability indicators
- Whether support is proportionate and accessible
- How outcomes for vulnerable customers are monitored
The FCA is clear that vulnerability is not a static category. It fluctuates, and firms must be responsive to that reality — particularly during periods of economic stress.
Distribution chains and shared responsibility
Consumer Duty has sharpened the FCA’s expectations around distribution chains. Lenders and brokers are being reminded that responsibility for outcomes does not stop at contractual boundaries.
The regulator is challenging firms on:
- Oversight of brokers, introducers and affiliates
- Accuracy and tone of financial promotions across channels
- Consistency of disclosures and messaging
- How issues are identified and escalated
- Whether firms intervene when partners fall short
In practice, this means firms must be able to evidence active oversight, not passive reliance.
What good looks like in year two
Firms that are navigating the FCA’s evolving expectations successfully tend to share a few characteristics. They treat Consumer Duty as a living framework rather than a completed project. They use MI to drive decisions, not just to satisfy reporting requirements. They revisit fair value assessments as conditions change. And they ensure Boards are genuinely engaged in reviewing outcomes.
Crucially, they can explain why decisions were made — and how those decisions improved outcomes for customers.
How ALPH can help firms move from framework to evidence
ALPH Legal & Compliance supports consumer credit firms in the second phase of Consumer Duty by focusing on what the FCA now cares about most: evidence, outcomes and governance in practice.
Our work includes independent Consumer Duty reviews, fair value reassessments, MI and outcomes testing, distribution chain oversight, vulnerability framework assessments and Board-level briefings.
One year on, the FCA is no longer asking whether firms understand the Consumer Duty. It is asking whether they can demonstrate that it is working. Firms that adapt to that shift now will be far better placed for the supervisory challenges ahead.