Consumer Duty View – June 2025

With the summer heatwave well and truly upon us, many firms may be settling into the BAU rhythm of Consumer Duty—but don’t be fooled, the FCA’s focus on the Duty is anything but cooling off.

The FCA’s strategy for the coming year is to become a “smarter regulator”. This means streamlining the FCA Rulebook – and the Duty is front and centre in that effort (as highlighted in this recent FCA speech). Rather than defaulting to writing new rules, the FCA wants to lean on the Duty – and a flexible outcomes focus - wherever it can. We’re already seeing signs of this in areas like conflicts of interest, client categorisation, and best execution, where the FCA seems open to streamlining (and maybe even updating) its rules (see FS 25/2 and our March Newsflash for more details).

In a recent speech, the FCA gave us a peek at what’s on its radar when it comes to the Duty. Top of the list? Monitoring across distribution chains, post-sales customer journeys, and how firms are using data and MI. They also encouraged firms to compare their own data with what the FCA publishes—and reflect on what actions they are taking as a result.

Many of you may be deep in the drafting of this year’s Board reports before the 31 July deadline. We are working with a number of you on your reports, including around how best to reflect the FCA’s feedback on Board reports published in December last year (detailed in our Newsflashhere). Following the FCA’s feedback, some of our key areas of focus when reviewing reports this year include:

• using data in order to justify conclusions regarding customer outcomes (for example, supplementing quantitative data with qualitative insights – especially where there are gaps),
• the clear identification of areas for improvement (rather than process change and scoping information) and the implementation of action plans to address these, which include appropriate timescales and owners,
• ensuring the focus of the report is on the outcomes and data of the relevant reporting period (as opposed to general descriptions of scoping, implementation and process changes), and
• facing the ongoing challenge of information sharing across the distribution chain, particularly those firms which do not have direct retail relationships or interactions.

We note that this will also be the first report following the FCA’s confirmation that the Consumer Duty champion role is no longer mandatory – we would be happy to discuss the nature of this role going forward and how to best reflect this in the report.

Finally, a little holiday of our own to flag to you - this July, we are packing our bags and heading to sunny Stratford to attend the FCA’s Regulatory Summit, which will give industry the opportunity to input on the FCA’s proposed actions and recommendations in terms of streamlining the rulebook, including workshops on Consumer Duty and the Consumer Composite Investments framework – expect a postcard from us reporting back soon!

This version of Consumer Duty View also brings you updates on:

• the FCA consultation on amendments to the Assessment of Value rules for Authorised Fund Managers,
• the FCA’s findings in relation to the Duty from its review of smaller asset managers and alternatives business models,
• the FCA’s findings on bereavement and power of attorney policies
• an interesting Supreme Court decision with a vulnerable customer angle, and
  • other Duty-related updates.

Please do reach out with any questions or feedback!

1. FCA consults on Amendments to Assessment of Value (“AoV”) for Collective Investment Schemes Sourcebook (“COLL”) (June 2025)

Tucked away in Chapter 7 of its latest Quarterly Consultation CP25/16, the FCA has proposed changes to COLL that would simplify the AoV rules for Authorised Fund Managers (“AFMs”), making them less prescriptive and more flexible. While that’s likely to be a welcome shift, it’s particularly important for firms that use AoV to meet their Price and Value obligations under the Duty - any internal changes to AoV need to consider any knock-on effects to Consumer Duty compliance.

The simplifications apply to the reporting rules for AFMs of UK UCITS, NURS, QIS and LTAFs. These changes follow feedback from last summer’s Call for Input, where many pointed out that the current COLL rules go further than what’s required under the Consumer Duty’s Price and Value outcome - potentially creating an uneven playing field. The FCA seems to agree, and is now looking to level things out…

In line with recent feedback, the FCA is looking to give firms more flexibility in how they report on AoV. Instead of sticking to the detailed requirements in COLL, the FCA is proposing a simpler approach: firms would include a summary of their AoV in the annual report, explain whether the charges are justified based on the value delivered, and outline any steps they’re taking if the value falls short. The existing governance rules would stay in place, along with the option to publish this information in a composite report.

The consultation closes on the 14 July 2025. For background on the AoV rules, and further details on the FCA’s proposals, you can read our article on this here.

Please do reach out to Catherine Weeks (Partner) and Rosie MacArthur (Managing Associate) if you have any questions on the potential impact of these proposals.

2. FCA publishes findings from smaller asset managers and alternatives business model review (May 2025)

The FCA published its findings from its review of smaller asset managers and alternative business models (with less than £1 billion AuM), which focus on three main areas:

• the Consumer Duty,
• high-risk investments, and
• conflicts of interest.

The FCA’s findings in relation to the Duty show that some firms still haven’t fully considered the application and scope of the Duty. The message is clear that it’s up to Boards and senior management to make sure it’s properly embedded. One area of concern which jumps out is Board reports. The FCA noted a general lack of formality in their creation, review, and approval, which could prevent management from effectively assessing, understanding, and responding to the outcomes experienced by retail customers. In some cases, firms couldn’t show that their Boards had properly reviewed and challenged the reports. It’s a good reminder: strong, well-documented Board reporting is key to demonstrating that senior leaders are taking the Duty seriously. Something to keep in mind as you prep this year’s reports and minute the relevant Board meetings.

The FCA also provided some product specific problematic examples, including retail investors being inappropriately onboarded to AIFs with unclear product structures, uncertain drivers of return, and opaque charging structure, as well as unsuitable high-cost investment strategies.

The FCA helpfully restated that the Duty should apply proportionately and subject to reasonableness. It recognises that firms will have different capabilities depending on their size, activities and available resources which is particularly relevant to smaller firms.

You can find further details on the FCA's findings in our article here. We are providing a lot of support to clients on their Consumer Duty Board reports - if it would be helpful to discuss how we might support you, please contact Penny Miller (Partner), Caroline Hunter-Yeats (Partner) and Rosie MacArthur (Managing Associate).

3. FCA findings on bereavement and power of attorney (“PoA”) policies (April 2025)

Following its multi-firm review focussing on how retail banks and building societies treat customers in vulnerable circumstances, particularly in situations involving bereavement and PoA policies, the FCA has now published its findings, highlighting good and poor practices identified.

The FCA’s key findings include the following:

• Policies and procedures: Whilst some firms have established clear policies and procedures for handling vulnerable customers and forums to deal with complex cases, the FCA found that there is a need for clearer guidance to be provided to employees in handling emergencies and balancing fraud protection with customer needs, with the FCA coming across instances of customers facing delays in accessing funds due to procedural inefficiencies.
• Customer needs: The FCA identified a lack of consistency in the use of systems to record and respond to customers, with issues around training and competency identified, including some staff failing to recognise or respond empathetically to distressed customers in bereavement or PoA circumstances.
• Outcomes testing and monitoring: Whilst the FCA found that firms generally had processes in place to monitor customer outcomes, they often lacked depth and clarity, with a need for more comprehensive data to assess customer outcomes effectively. Reporting to senior committees sometimes lacked detailed commentary.
• Customer journeys: The FCA found that there were limited access channels for attorneys and fragmented customer relationship management systems which hindered effective case management, leading to repeated information requests and delayed processes.

The FCA expects retail banks and building societies to continue refining their approaches to ensure they effectively meet the needs of customers in vulnerable circumstances. We have done a lot of work with firms in relation to policies and procedures in relation to vulnerable customers – please do reach out to Penny Miller (Partner), Caroline Hunter-Yeats (Partner) and Rosie MacArthur (Managing Associate) if you have any questions.

4. Supreme Court decision on relation to undue influence and independent legal advice (June 2025)

We’re heading to the courts now, with a Supreme Court decision which may have implications in relation to how banks deal with issues around undue influence and the need for independent legal advice from a vulnerable customer angle.

For over 30 years, there have been established practices that banks should follow when making loans which are secured over jointly owned property. Those practices may need to be reconsidered in light of the Supreme Court’s decision in Waller-Edwards v One Savings Bank PLC. In this case, the Supreme Court held that where a lender lends to joint borrowers, but there is more than a trivial element of the borrowing which discharges the debts of one of the borrowers and so might not be to the financial advantage of the other, the lender has notice of the possibility of undue influence and should ensure that the vulnerable party receives independent legal advice.

This case will be of particular interest to retail lenders, private wealth lenders and other lenders whose practice requires consideration of this issue. It may drive a re-consideration of internal processes and policies on how a lender monitors and determines when independent legal advice to a transaction counterparty is required, as well as creating a risk that transactions may be open to challenge on this basis.

You can find further details on this case in our article available here. While the implications of the judgement are yet to be fully digested by the industry, we are discussing the impact with many of you. If you would like to speak please do reach out to Paula Macnamara (Partner) and Simon Fraser (Senior Knowledge Lawyer).

5. FCA review of international payment transparency under Consumer Duty (May 2025)

For firms offering international money remittance and cross-border payments to UK customers, the FCA has published its findings following a review into how firms communicate the cost of international payments. The FCA has seen differences in firms' transparency and communications on the cost of international money remittance and cross-border payments. Although some firms were clearly displaying the amount recipients would receive based on the amount remitted, as well as detail of fees and charges, this was not universally the case. In particular, the FCA found that:

• Transaction fees were not always clearly displayed.
• Additional fees, such as those charged by intermediary banks (which act as a bridge between the sending and receiving bank), were often not displayed up front.
• It was not always clear that fees could vary.
• Relevant information for consumers was not always easy to find.

The FCA expects firms to assess the clarity and comprehensiveness of the information they provide, and implement any improvements needed as a result of the examples of good and poor practice identified in the FCA’s findings. The FCA confirmed that future work is anticipated in order to evaluate the improvements made in this area. For further details on the FCA’s findings, you can read our article here, or contact Oliver Irons (Partner) and Michael Oxlade (Managing Associate).

6. Other Updates

There have been a number of other Consumer Duty-related updates since the last edition of Consumer Duty View in March this year, which we have summarised below:

• FCA Policy Statement (PS 25/2) on investment research payment optionality for fund managers (May 2025): One to note for those of you considering the adoption of the joint payment option for purchasing research introduced through this Policy Statement, which includes a guardrail requiring fund managers to assess the price and value of research periodically on a fund-by-fund basis. Note that the FCA has also confirmed that the adoption of the joint payment option will be considered as a “significant change” requiring the fund manager of authorised funds to notify unitholders before the changes take effect. You can find further details in our article here.
• HM Treasury consultation on the Consumer Credit Act (May 2025): HMT has published a consultation paper on its proposed widescale reforms to the Consumer Credit Act, which aim to create a more agile and consumer-focused regime. HMT confirmed that it will be leaning into the outcomes-focussed approach introduced by the Duty, focussing on achieving good consumer outcomes and enhancing consumer understanding of credit products. You can find more details on these proposals here, and please reach out to Oliver Irons (Partner) and Michael Oxlade (Managing Associate) for more information.
• FCA Consultation Paper (CP25/11) on simplifying rules on mortgage lending (May 2025): The FCA published a Consultation Paper with proposals to make it easier, faster and cheaper for customers to make certain changes to their mortgage and engage with their provider. This includes a proposal to introduce a rule which would require firms to consider whether processes are appropriate to identify execution-only customers for whom advice or other customer support may be necessary to avoid foreseeable harm. The FCA indicates that it expects firms to continue to encourage consumers to take advice when they consider this will deliver good outcomes, and take steps to avoid causing foreseeable harm where the firm anticipates a poor outcome through the consumer proceeding with an execution-only transaction (for example, ensuring the customer understands and accepts the inherent risks of proceeding or checking that the customer wanted the product and signposting the availability of advice). The consultation closed on 4 June 2025, with the FCA aiming to publish a policy statement in Q3 2025.
• FCA Discussion Paper on its Mortgage Rule Review – the future of the mortgage market (June 2025): The FCA has published a Discussion Paper (DP 25/2) on the future of the mortgage market, looking at what the market needs to deliver for different consumers at different stages in their lives – clearly a hot topic for the FCA at the moment. The FCA confirm that the Consumer Duty is central to their regulatory approach, and ask for further views on the role of the Duty in the Discussion Paper, including whether prescribed rules should be removed / streamlined with firms left to decide on appropriate approaches themselves, with the Consumer Duty helping to establish a clear consumer outcome focus.
• FCA Consultation Paper on complaints reporting (May 2025): As part of the FCA's drive to be a "smarter regulator", the FCA has published a consultation (CP 25/13), closing on 24 July 2025, applicable to regulated firms that report complaints data which proposes to consolidate and streamline existing complaints related returns (among other things).