Consumer Duty Newsflash: CD CFI action plan

FCA outlines Action Plan on Consumer Duty rule review

On 25 March 2025, the Financial Conduct Authority (FCA) released an Action Plan detailing proposals to review and streamline regulatory expectations in the context of the Consumer Duty. This initiative aims to reduce burdens on businesses and enhance consumer outcomes. The FCA's Feedback Statement FS25/2 outlines an ambitious Action Plan aimed at simplifying regulatory requirements for firms following the introduction of the Consumer Duty.

This is a follow-up to the Call for Input (CFI) published last July (see our July 2024 edition of Consumer Duty View here), where the FCA asked for feedback on how to streamline and simplify its rules in light of the Consumer Duty.

The FCA have stated that there was clear feedback to the CFI that now is not the time for wholesale changes to the FCA rules. However, they have set out some proposals for immediate action in discrete areas and plans for longer-term work.

Next steps for the FCA: We have set out below the actions that the FCA will take. They will consult on the proposed actions using their accelerated consultation process. The FCA will engage further with stakeholders on areas where there was mixed feedback and plans to hold an in-person summit in summer 2025 to discuss these. It will then set out further detail on its longer term work in September 2025.

Next steps for firms: In our view, there are three things firms should be doing now:

1. Prepare to engage with the FCA's consultations over the next year and provide feedback on proposed changes.
2. Assess current compliance frameworks in light of potential simplifications and increased flexibility.
3. Monitor updates from the FCA regarding the withdrawal of outdated communications and upcoming consultations.

Immediate actions and further plans:

1. Streamlining regulations:
   • The FCA intends to retire over 100 pages of outdated guidance and withdraw hundreds of supervisory publications later this year to make regulations more navigable for consumer finance, investment, and mortgage firms. This includes guidance in the mortgage and consumer finance sectors, as well as guidance related to the Treating Customers fairly initiative.
   • The FCA will review all Dear CEO letters and portfolio letters pre-dating April 2022 and will seek to withdraw them by the end of April 2025, subject to any exceptions. They will remain publicly available. The FCA will keep firms updated on how this will be implemented through Q2 2025.
   • The FCA will review the definitions of retail customers and small and medium-sized enterprises (SMEs) for consistency to reduce compliance costs.
   • The FCA will improve accessibility of the rule review feedback tool as part of the Handbook website update in Q3 2025.
2. Consumer Duty related clarifications:
   • The FCA will consult later this year on changes to the requirement for asset managers to report annually on their value assessments.
   • The FCA will engage with stakeholder on providing more clarity around how the product governance rules and Consumer Duty rules on fair value interact.
   • The FCA will engage with firms around how firms who do not interact directly with retail customers can have more certainty around expectations under the Consumer Duty. For example, how firms should share information within the distribution chain and how the Duty applies proportionately to firms with an indirect role.
   • The FCA will publish a Consumer Duty smaller firm guide in 2025.
3. Discrete sourcebook reviews:
   • The FCA will explore options for reviewing the Senior Management Arrangements, System and Controls sourcebook (SYSC) to make it less confusing.
   • Later this year the FCA will consult on updating requirements in the Client Assets sourcebook (CASS) such as record keeping requirements, reconciliation rules and removal of interest owed to firms.
   • The FCA will review the Training and Competence (TC) sourcebook and competence requirements in other sourcebooks.
   • Later this year, the FCA will consult on measures addressing outdated references to Principles 6 and 7 and streamlining investment and borrowing powers in Chapter 5 of the Collective Investment Schemes sourcebook (COLL).
4. Flexible disclosure rules:
   • Current prescriptive disclosure rules in the retail banking sector will be reviewed to allow firms more flexibility in tailoring communications to customer needs and preferences, especially for online and digital transactions.
   • This will include consideration of requirements for the summary box for savings accounts, for example.
5. Mortgage and lending review:
   • The FCA plans to review expectations for mortgages and lending, focusing on simplifying communications about savings accounts.
   • The FCA will issue a consultation paper (CP) an discussion paper (DP) on mortgage changes in May and June 2025.
   • These will cover proposals around easing remortgaging, borrowing cost reductions, alternative affordability testing and lending into later life.
6. Credit advertising rules:
   • A review of parts of the credit advertising rules is proposed, particularly concerning lengthy terms and conditions.
   • The FCA will consult on credit advertising rules in the next year.
7. Insurance review:
   • The FCA will revisit rules for businesses with customers outside the UK, such as assessing whether UK rules should apply to overseas customers of insurance firms.
   • The FCA will ask discussion questions on the international scope of the conduct rules in the insurance sector by summer 2025.
   • The FCA will review the reporting requirements that were introduced under the general insurance pricing practices intervention.