On 30 September 2025, the FCA released a series of important updates on the Consumer Duty:

• A letter to the Chancellor of the Exchequer, Rachel Reeves MP, on the Consumer Duty’s application to wholesale firms, outlining the FCA’s four-point action plan;
• A new webpage on the FCA’s Consumer Duty focus areas, setting out the FCA’s workplan for 2025/26; and
• A new webpage on the FCA’s Consumer Duty requirements review update, setting out the action taken by the FCA since its Call for Input in July 2024 and tracking further actions and future priorities.

Taken together, these developments signal the regulator’s intention to clarify aspects of the Duty and address concerns around proportionality, particularly for firms with predominantly wholesale activities.

Background: Addressing industry concerns

The Consumer Duty, introduced by the FCA in July 2023, sets a higher standard of consumer protection for retail financial services in the UK. It requires firms to act in good faith, avoid foreseeable harm, and support customers’ financial objectives, and to deliver good outcomes for customers, focusing on four key areas: products and services, price and value, consumer understanding and consumer support.

Since its introduction, the Duty has attracted both praise and criticism. While many welcome its emphasis on improving customer outcomes, firms have faced challenges around scope – particularly regarding business-to-business (B2B) activities and obligations within distribution chains. Cross-border operations compound these issues, as firms must reconcile potentially conflicting or overlapping regulatory requirements across jurisdictions. Industry concerns also include significant implementation costs and potential duplication with existing frameworks, such as product governance and conduct rules.

Against this backdrop, the FCA is taking steps to streamline the rules and support firms with their further application and implementation of the Duty.

FCA’s Four-Point Plan: Making the Consumer Duty proportionate for wholesale firms

The Chancellor’s letter reports on the FCA’s plan to address concerns about the application of the Consumer Duty to firms primarily engaged in wholesale activity. With wholesale firms’ activities often being more peripheral to retail outcomes, there has been considerable uncertainty about the Duty’s scope. Whilst wholesale firms are not generally exempt, the letter clarifies that forthcoming changes are designed to make compliance more proportionate and practical.

At HM Treasury’s request, the FCA engaged widely with the industry to better understand firms’ concerns. In light of that feedback, it has signalled plans to amend the rules to ease disproportionate burdens while preserving sufficient protections for retail customers.

The letter outlines a four-point action plan:

• Clearer guidance: in 2025, the FCA plans to publish clearer guidance on how it expects firms to apply the Consumer Duty when collaborating to manufacture products for retail customers;
• Client categorisation: in 2025, the FCA plans to consult on updating the client categorisation framework to help firms identify investors who can be treated as professional clients. Proposals include introducing a new high-asset threshold test as a more objective tool, allowing firms – with client consent – to exclude certain individuals from the scope of the Consumer Duty and other retail protections. This is likely to be broadly welcomed by the sector with many firms finding the existing opt-up regime needlessly restrictive. The FCA also recommends that HM Treasury considers modernising outdated legislative exemptions in the Financial Promotion Order and the Promotion of Collective Investment Schemes Order to align with the updated regulatory framework;
• Distribution chains: in the first half of 2026, the FCA will consult on changes to how the Consumer Duty obligations should apply across multi-party distribution arrangements. This includes reviewing whether current exemptions provide sufficient relief (including whether to exclude more clearly certain B2B activities), considering additional carve-outs for firms already meeting other regulatory standards and clarifying how firms can rely on each other when working together in distribution chains, such as when designing and selling structured products; and
• Territorial limitation: the FCA proposes to exclude business with non-UK customers from the Consumer Duty’s scope. However, it will carefully consider the possible impacts on consumers, including UK expatriates.

The FCA’s four-point plan is a welcome step toward making the Consumer Duty more proportionate for wholesale firms, offering clearer guidance and potential relief relating to client categorisation, distribution chains and territorial scope. While the plan signals a constructive intent to reduce unnecessary burdens, its effectiveness will ultimately depend on how clearly and consistently the FCA translates these measures into actionable rules. It is important to note, however, that the proposed changes do not equate to a complete removal of the need for wholesale firms to consider retail consumer impacts – the FCA expects clear accountability where firms, including product manufacturers, play a role in significant harms caused to consumers.

In addition, whilst the FCA is seeking to rebalance risk as part of its strategy, it is keen for this risk to be shared across the Government, Parliament and the regulator, noting that it would be helpful for metrics to be developed “articulating the Government’s degree of tolerance for consumer harm and potential incidents of significant consumer detriment”.

FCA’s Focus Areas: What’s next for the Consumer Duty in 2025/26?

The FCA has published a new webpage outlining its areas of focus for the Consumer Duty for 2025 to 2026. The regulator has prioritised initiatives where it sees the greatest potential for consumer harm and where further clarity on expectations will help firms deliver better outcomes. Its priorities fall under four themes:

• Embedding the Consumer Duty and sharing good practice: the FCA will conduct a handful of multi-firm reviews to assess how firms are embedding the Consumer Duty in practice. Four cross-cutting projects will look at (i) product and service design, (ii) firms’ approaches to outcomes monitoring, (iii) the structuring of customer journeys (including use of friction) and (iv) whether firms’ communications are effective in helping consumers make informed decisions. The FCA may request data where necessary and will provide feedback to support firms with implementation where required.
• Vulnerability and data protection: acknowledging the challenges firms face in balancing obligations around customer vulnerability, data sharing and data protection, the FCA will work with the Information Commissioner's Office to provide further clarity on the interaction between these requirements and the Consumer Duty. Guidance is expected in Q1 2026.
• Price and value: the FCA will continue to scrutinise whether firms are delivering fair value, including through ongoing market studies into pure protection insurance, unit-linked pensions and long-term savings, with findings and next steps expected to be published later this year. This builds on its existing work on premium finance, with interim findings published in July 2025.
• Sector-specific priorities: the FCA has highlighted upcoming work in the following sectors:
• retail banking: the FCA’s focus will include reviews of fair value and consumer understanding in SME business current accounts;
• consumer finance: the FCA will address consumer understanding in the credit card market;
• consumer investments: the FCA will focus on identification of vulnerability by wealth managers, expectations for wealth and advice firms when evaluating fair value and risks to providing unsuitable advice; and
• wholesale buyside: the FCA is looking at how model portfolio services firms are implementing the Consumer Duty, with work on its multi-firm review expected to start in Q4 2025 and FCA findings published in the summer of 2026. The review is expected to focus broadly on how firms are applying the Consumer Duty to provide confidence that investors are receiving good outcomes from model portfolio services.

In relation to sustainable finance, the FCA simply noted that it has paused its work to finalise rules on extending sustainability disclosure requirements and investment labels to portfolio management.

For firms, these focus areas provide useful signposts as to where supervisory scrutiny will fall and an opportunity to benchmark their own practices against emerging good practices. At the same time, the breadth of the FCA’s planned activities highlight the scale of the challenges faced by many firms to ensure they stay abreast of relevant developments and implement any changes required to address the regulator’s expectations.

Consumer Duty Requirements Review: FCA streamlines rules, but holds back on substantial revisions

The FCA has published a webpage setting out how it plans to further streamline its rules following the introduction of the Consumer Duty. This builds on the FCA’s feedback statement (FS25/2) published in March 2025 on the review of FCA requirements following the introduction of the Consumer Duty (which we considered here), as well as subsequent engagement with financial services firms, government bodies and consumer groups at its Regulatory Summit in July 2025.

In addition to the proposals outlined in the Chancellor letter and the FCA’s 2025/26 workplan (see details above), the new webpage highlights several on-going workstreams, including:

• Collaboration with the Financial Ombudsman Service (FOS): the FCA is working with HM Treasury and the FOS on a major package of measures to modernise the redress system (which we reported on here), with next steps expected in the first half of 2026; and
• Updating legacy disclosure rules: the FCA intends to simplify and modernise disclosure requirements to better support consumers. Planned reforms include retail disclosure changes by Q4 2025, consultations on APR and cost disclosures and, separately, on retail banking disclosures in 2026. The FCA will also consider wider cross-cutting work on disclosures to ensure consistency across the rulebook.

The FCA has confirmed that it will not, at this stage, pursue a broad review of its product governance, client asset and training and competence sourcebooks, though it has left the door open for future reconsideration. Instead, it will focus on strengthening systems and controls around conflicts of interest, alongside pressing ahead with reforms to the Senior Managers and Certification Regime (which we have considered here).

Further work includes opportunities to provide clearer guidance on the scope of FCA rules, including the Consumer Duty. The FCA will continue to share views on good and poor practices relating to products and services, monitoring of outcomes and consumer understanding. It will also seek to improve the consistency in the use of definitions in the Handbook (e.g. retail customer).

The webpage also provides a tracker of the FCA’s in-progress and upcoming workstreams.

The approach set out by the FCA signals a phased approach to regulatory simplification. Much will depend on whether the incremental reforms deliver the clarity and consistency that firms and consumers alike are seeking, or whether further structural changes will ultimately prove unavoidable.

Next steps for firms

The FCA's recalibration reflects a pragmatic response to firms' concerns while maintaining the Consumer Duty’s core protective framework for consumers. Similar to other UK regulatory developments, these proposals should be read in light of the UK government's growth agenda and the FCA's secondary competitiveness and growth objective.

It is clear from the FCA’s priorities and proposals that supporting a competitive financial services sector in the UK remains a key focus. This includes getting the approach to the Consumer Duty right, which will involve balancing a proportionate and flexible approach with ensuring an appropriate degree of consumer protection.

The FCA wants firms to be able to take calculated risks with confidence, be innovative, drive growth and support the long-term development of UK markets and the wider economy. But it wants them to do so in a way that still helps retail customers to pursue their financial objectives and that continues to support good outcomes for those customers.

In light of the developments outlined above, firms need to be prepared to review their application of the Consumer Duty, in particular as part of the FCA’s multi-firm reviews and sector-specific priorities. Wholesale firms will be particularly interested in considering the FCA’s upcoming consultations on distribution chains and client categorisation.

It is likely that some activities currently viewed as in-scope may fall outside the scope of the Consumer Duty as a result of these changes. In other areas, we may see a development in the FCA’s approach to applying the Duty. However, firms and industry associations will need to continue their engagement with the regulator to ensure that the much-needed predictability and clarity in the application and scope of the Consumer Duty can be achieved, along with improved efficiency and flexibility in delivering good outcomes for customers and meeting regulatory expectations.