Checklist: Embedding the Consumer Duty: practical considerations (UK)

Introduction

This Checklist was produced as part of a joint know-how initiative between Cosegic Limited and Lexology Pro.

This checklist will assist in-house counsel, private practice lawyers, Consumer Duty champions and compliance professionals by providing practical steps for firms to consider how to embed the Financial Conduct Authority’s (FCA) Consumer Duty (Duty) requirements within their culture and processes to ensure that products and services are well designed for their target market.

The checklist covers the following steps:

1. Deliver and demonstrate good customer outcomes
2. Prepare annual board report
3. Ensure full compliance for closed products and services

It is presented as a list of requirements that can be reviewed as they are addressed and includes explanatory notes that correspond to each step in the checklist.

This checklist can be used in conjunction with the following How-to guide: The FCA’s Consumer Duty: putting the needs of customers first.

Step 1 – Deliver and demonstrate good customer outcomes

Step 2 – Prepare annual board report

Step 3 – Ensure full compliance for closed products and services

Explanatory notes

General notes

The Duty is made up of three components:

• a new consumer Principle 12 requiring firms to act to deliver good outcomes for retail customers;
• cross-cutting rules which set the standard of conduct for firms expected under Principle 12; and
• rules and guidance regarding four outcomes that the FCA expects to see in the firm-consumer relationship.

Under the Duty, there are several obligations for firms to have an effective governance process in place to ensure they are delivering good outcomes for retail customers (set out in PRIN 2A.8). This includes preparing a report for governing bodies setting out the result of monitoring customer outcomes under PRIN 2A.9. In Price and Value Outcome: good and poor practice update, the FCA note ‘these governance arrangements should be taken as an opportunity to gain senior-level challenge on whether fair value is being delivered’. The FCA note they would not expect the same level of formality in small firms with simpler governance structures.

In addition, the Duty includes Individual Conduct Rule 6 which applies to employees in a firm to ‘act to deliver good outcomes for retail customers’ where the activities of the firm are within scope of the Duty (see chapter 2 - FG22/5). The individual conduct rule applies to the extent that it is reasonable and proportionate: the scope of a person’s job and their seniority may affect the scope of their obligations under the rule. The more senior a person is and the more relevant their role is to the Duty, the more the FCA expects from them in delivering good outcomes for customers (see paragraph 10.23 – FG22/5).

Firms are expected to ensure that employees are aware of this new individual conduct rule and provide training to ensure employees understand their requirements under the Duty (including the individual conduct rules).

Legal framework

The Duty aims to set a higher standard of consumer protection in financial services and builds on the statutory duty to protect consumers under the Financial Services and Markets Act 2000 (as amended) (FSMA 2000), and the principle relating to the fair treatment of customers (the TCF). The Duty came into force on 31 July 2023 for new and existing financial products and services that are open for sale or renewal and applies to closed book products from 31 July 2024. For more information on the Duty see How-to guide: The FCA’s Consumer Duty: putting the needs of customers first.

Step 1 – Delivering and demonstrating good customer outcomes

The FCA expects the Duty to remain a top priority for firms and the regulator has advised that they adopt a pragmatic approach when looking at enforcement of the Duty, tackling breaches that pose the greatest risk of harm to consumers.

In a review of payment firms’ implementation of the Consumer Duty the FCA noted that the most compliant firms ‘tended to have a systematic implementation approach’ with clearly articulated customer-centric purposes with strong governance and control frameworks.

1.1 Does the firm understand the FCA expectations?

In its finalised guidance on the Duty (FG22/5 – Final non-Handbook Guidance for firms on the Consumer Duty) (FG22/5), the FCA notes ‘a firm’s board or equivalent governing body is responsible for ensuring that the Duty is properly embedded within their firm and boards and the Duty champion play a pivotal role in compliance’. The FCA has since clarified that while the Duty champion remains important, it is not a formal requlatory requirement offering a degree of flexibility to firms – see section 1.5.

In practice, the responsibility for delivering good outcomes rests with boards and senior management teams. This includes ensuring that the firm’s strategies, leadership, procedures and people management policies and practices (which include incentives at all levels) are proactively working to embed a culture of compliance across the business. The FCA expects firms to have ‘customer outcomes as a key lens for risk and audit’ (eg, building Duty compliance across risk management frameworks and business as usual operations).

Firms must be able to demonstrate how Consumer Duty works in practice, and address gaps and be proactive where concerns are identified. Depending on the type of firm, this can vary from compliance on open products (eg, fair value assessments not identifying good customer outcomes) or working reviewing the communications it produces for clarity and transparency on a regular basis. Firms will be expected to refer to FCA guidance, and FCA portfolio letters and communications to align requirements.

Senior managers are expected to demonstrate higher standards of conduct and will be held individually accountable. To ensure that the Duty is appropriately embedded, they will need to review the Senior Manager and Certification (SMCR) framework, and ensure employees are aware of the application of Individual Conduct Rule 6 to their role (where the activities of the firm fall within scope of the Duty). Senior Managers also have to comply with Senior Manager Conduct Rules 2 and 3 to ensure that they take all ‘reasonable steps’ to regulatory compliance by taking pre-emptive action, adequately responding to breaches and ensuring that they have controls and processes in place to report and review breaches.

See examples of FCA expectations under Training. The FCA will also consider evidence of individuals’ understanding of and actions taken to comply with the Duty when considering individuals for approval to senior management functions.

The Duty is a key FCA priority in its 2024/25 Business Plan with continued focus on Duty implementation and testing compliance. In its 2025/26 Annual Work Programme, the FCA announced plans to streamline its rules, guidance and materials, and broader communications, reflecting the embedding of the Duty into its regulatory framework. These intentions were outlined in FS25/2: Immediate areas for action and further plans for reviewing FCA requirements following introduction of the Consumer Duty. As part of this ongoing work, the FCA will host an in-person summit in Summer 2025, followed by the publication of a comprehensive statement in September 2025.

Examples of good practice and areas for improvement provided in February 2024 build on the FCA review of the firm’s implementation plans and fair value frameworks and serve as useful reference guidance. See also Price and Value Outcome: Good and Poor practice guide and Payments Consumer Duty multi-firm review.

1.2 Has the firm agreed the outcomes it wants its customers to receive, including customers with characteristics of vulnerability?

Firms should by now have mapped out customer journeys and agreed ‘baseline’ standards for ‘good customer outcomes’ per target market and for each in-scope product or service. How customers engage with products and services from point of sale and post-sale for the duration of the customer relationship is the focus of the Duty. Areas where risk is greatest or where products are more likely to be used by customers with characteristics of vulnerability should be given particular attention. Firms should have set up systems and processes to enable customers to disclose their needs and ensure that staff are supported to identify signs of vulnerability, through staff training and provision of resources. Where the outcomes customers are receiving are not as projected, firms will need to undertake more detailed root-cause analysis to identify why this is happening and put things right. A key message from the FCA’s updated review on the treatment of customers in vulnerable circumstances published on 7 March 2025, is that fair treatment is non-negotiable. The FCA emphasises that vulnerability should be understood as a spectrum of risk, potentially affecting any customer depending on their specific circumstances – such as ill health, caring responsibilities or low financial resilience. The review includes examples of both good and bad practice and calls for a ‘cultural’ shift within firms. This includes proactively identifying vulnerable customers, providing appropriate support, and ensuring staff are equipped to deliver consistently good outcomes for customers in line with the Duty – particularly for vulnerable customers.

1.3 Has the firm agreed how it wants to deliver those outcomes?

How ‘good outcomes’ will be delivered will have been established during the Duty implementation process. The FCA has stated that implementation of the Duty will be iterative, and that it is good practice to review progress against the objectives set in the implementation plan on a regular basis. This helps firms to take stock and to develop proactive strategies to address issues and tackle problems. Firms should also ensure that employees are aware of the wider Duty obligations to understand customer needs and provide employees with the necessary training and tools to enhance the customer experience and good outcomes that the FCA is seeking. Senior managers also have a role to play to create higher standards and to ensure Duty compliance is appropriately embedded across the firm (eg, job descriptions, statement of responsibilities and management responsibilities map). See also Consumer Support Outcome: good practices and areas for improvement.

1.4 How is the firm undertaking outcomes testing and analysing and tracking MI?

Firms must have management information (MI) and quality data to evidence results of outcomes testing – for example, ask the following questions:

• Can the firm evidence that customers have been sold products or services that meet their needs including customers with characteristics of vulnerability?
• What sample size of customers is being tracked?
• Has fair value been provided?
• Are customers receiving the right level of information (as appropriate to their needs)?
• How are complaints being addressed and are customer needs supported?

The FCA expects that the frequency of monitoring and the type of data collected will depend on the size and type of firm, its role in the distribution chain, the nature of the product and the target market. Firms must also consider the current consumer outcomes and interrogate practices to see if they are working and then address any gaps. The FCA has made it clear that repackaging existing data is not enough and that they expect firms to identify whether distinct groups of customers, such as those with characteristics of vulnerability, are receiving worse outcomes. Where firms are outsourcing, they must have arrangements in place with third parties to capture data necessary for monitoring too. This could include data from distributors related to customer feedback or details of broker commissions.

Effective record-keeping is important and firms need to record data to populate dashboards or board reports as required. Firms should be ready to provide all paperwork to the FCA upon request and be prepared for challenge on the contents. On 28 June 2023, the FCA published a press release highlighting 10 key questions for firms and these questions remain relevant now the Duty has come into force. Chapter 10 of FG22/5 sets additional questions firms can expect to be asked by the FCA under separate titles: ‘Culture and Governance’ and ‘Customer Outcomes’.

1.5 Is the board providing effective engagement and challenge in relation to the Consumer Duty?

As of 27 February 2025, the FCA no longer expects firms to appoint a Duty champion. Boards can decide for themselves whether they wish to retain the role now that the Consumer Duty is in full effect, however, to avoid conflicts of interest and ensure that the individual appointed can challenge at Board level, it is best not to appoint a compliance officer to undertake this role.

When determining their approach in practice, firms should consider their specific organisational needs including how they manage compliance, risk and internal audit control functions to ensure effective implementation and oversight of the Consumer Duty. Will having a Duty champion make a difference to their arrangements?

Previous guidance in FG22/25 required in-scope firms to have a Duty champion at board (or equivalent governing body) level to work alongside the chair and the CEO to ensure that the Duty is being discussed regularly and raised in relevant discussions to ensure appropriate scrutiny of leadership focus and how they are embedding the Duty and focusing on consumer outcomes. Since this is no longer a requirement, the FCA has stated that it will take steps to amend references to the Duty champion in FG22/5 ‘in due course’ and the relevant sections as explained in more detail below have not yet been updated.

The role of the champion is not a prescribed responsibility under SMCR, nor does the concept appear in PRIN 2A. Firms now have the flexibility to consider whether to make the appointment and firms can decide how best to adapt the role to suit their needs and to fit with existing roles and responsibilities, whether by appointing an independent non-executive director (NED) or by managing compliance internally without a Duty champion.

From a governance perspective, compliance obligations will prevail regardless of whether a Duty champion is formally appointed. Where a champion is in place, they must have a clear understanding of the responsibilities of their role. The individual should be independent and impartial with a willingness to challenge. They should have the confidence and seniority to communicate with the FCA. It is worth considering how the champion is working for the firm in practice – are they using their ‘voice’ to challenge and champion progress and decision-making?

The champion should meet business stakeholders regularly to assess compliance under existing governance structures. Board minutes should record these meetings noting discussions and challenge including the checks and balances that are being put in place. Record-keeping and ongoing compliance is not optional, and if the firm decides to proceed in the absence of a designated champion, boards and committees must ensure their obligations under the Duty are in the words of the FCA ‘reflected in their strategies, governance, leadership and people policies, including incentives at all levels.’

Firms need to put retail customer outcomes at the heart of their business strategy to ensure there is clear accountability for meeting the expectations of the Consumer Duty and for consistently delivering good outcomes for retail customers.

FG22/5 sets out some examples of the ‘outcomes-focused’ questions the champion, or other members of firms’ governing bodies, could ask firms to ensure the firm is meeting expectations under the Duty (see paragraph 10.15). See also Consumer Duty – information for firms, FCA 10 key questions: One month to go for the Consumer Duty – FCA (which is still relevant).

Firms should continue to monitor the FCA’s amendments to FG22/5 and the FCA website for the revised guidance.

1.6 Consider the role of the board and senior management in relation to the Consumer Duty

Firms need to provide the board with the appropriate level of information, in a timely manner, in the correct format and with the sufficient level of detail (ie, not overly technical) to enable the board to make an informed assessment of the information presented.

Firms should also consider whether they need to provide interim updates between board meetings and the method of reporting where committees are involved in delegated decision-making. The level of oversight and monitoring at board level will depend on the nature and size of the firm – for example, a car dealership with one finance product presents less risk to customer outcomes than an investment manager offering stocks and shares.

If a firm decides to retain the Duty champion,they should review how information flows ‘upstream’ and how issues are being escalated to the board. As part of ongoing monitoring, board inductions and evaluations should be undertaken at least annually to ensure new and existing board members understand what ‘good’ looks like under the Duty and that they understand their obligations under the Duty.

Monitoring Duty compliance needs to be habitual, like anti-money laundering (AML) or counter-terrorist financing (CTF), and firms need to collaborate with the board and be honest. This applies equally to their interactions with the FCA. PRIN 2A.9 sets out further detail on monitoring of consumer outcomes and what this means for firms is set out in chapter 11 of FG22/5. FCA guidance notes that a firm’s governing body should review and approve the firm’s assessment of whether it is delivering good outcomes for its customers which are consistent with the Duty and agree any action required, at least annually (PRIN 2A.8.4).

Identify key performance and risk indicators to measure customer outcomes. Firms could consider using ‘red, amber, green’ (RAG) ratings to highlight issues and draw attention to areas of concern with a red rating denoting the area of highest risk, or potential for customer harm. Assurance statements from across business lines (eg, products and services, communications, customer support) together with information from other firms in the distribution chain and results from testing should be included in board reports. Red flags must be highlighted not hidden.

Where firms identify risks to delivery or evidence of weaknesses in processes (eg, introduction of a new product or service line, or amendments to charges or fees, or poor outcomes), they need to proactively remediate, take appropriate action and keep the board updated. They should also test whether any actions taken have delivered good customer outcomes at a later stage. Records of all board decisions and rationale in decision-making need to be retained as these could be subject to FCA scrutiny. Board sign-off is not just a tick-box exercise and positive actions for change or future business strategy must also be considered.

1.7 Has the firm got processes in place for putting things right where issues are identified?

With increased scrutiny, it is likely that firms will identify issues or areas where improvement could be made. The FCA expects firms to be proactive in how they address these. Firms should record all risks and issues and have an action plan in place (eg, using the RAG rating). The action plan will also note who is accountable for managing the project and the related timelines. Firms should build ongoing monitoring and review of lessons learned to continually improve processes and for effective oversight and assurance. Keep the board updated and note risk areas on board meeting agendas.

Step 2 – Prepare annual board report

Under the Duty rules, firms need to prepare a report for the board which covers all aspects of Duty compliance and set out whether the firm is delivering good outcomes for retail customers (the board report). This should be done annually. This is an important internal governance document, the contents of which (together with the MI on which it is based) may be assessed by the FCA when monitoring and evidencing good and bad practices in Duty compliance.

In December 2024, the FCA published its first annual review of Consumer Duty board reports, assessing submissions from 180 firms across a range of sectors. Noted areas for improvement included quality of data used to demonstrate how outcomes are being delivered, inadequate assessment of the impact of products and services on different customer groups (particularly those with vulnerable characteristics), a lack of documented evidence of board scrutiny, and several reports failed to provide clear action plans for addressing gaps in compliance.

Firms should carefully review the findings to align their internal reporting and governance procedures against the FCA expectations.

2.1 Create action plan with timelines for delivery

Boards are expected to review and agree their Consumer Duty board report annually at the end of July. Firms should have agreed the format, the MI and the outcomes testing needed to prepare the board report. Firms may also need to get information from third-party providers. There is no prescribed format as the FCA has not provided a template; however, the FCA advises that it is up to firms to decide how to communicate the necessary information, noting that the level and complexity of the board report may vary between firms.

Broadly the board report should comprise three elements (see paragraph 10.12, FG22/5):

• evidence and results of customer outcomes monitoring and assessment of relevant MI (including where poor or worse outcomes identified);
• confirm compliance or identify actions to address risks or achieve better outcomes; and
• assessment of the firm’s business strategy and compliance with the Duty obligations.

2.2 Allocate roles and responsibilities including the role of second and third lines of defence

Preparation of a board report takes time. It should be a comprehensive assessment of how firms are meeting Duty requirements, involving input from across the business. Planning is critical to ensure resources are allocated to prepare the board report alongside existing workstreams. MI and real-life case examples will likely come from first-line product and operations teams (with input across second and third lines as required). Action plans should set out ownership, responsibilities, and key milestones. Board members will need to be satisfied as to compliance before sign-off and where issues have been identified, the board will need to be briefed on what actions have been taken or are being planned and when the action will be closed.

Responsibility for preparing the board report will vary from firm to firm, however, ideally the first line should do it, as they have first-hand knowledge of customer issues and whether the firm is delivering good customer outcomes. It will be their job to coordinate and incorporate responses across all three lines of defence. In most cases, the Duty champion, if retained by a firm, will be in a second- or third-line role and shouldn’t prepare the board report as they won’t have the required first-hand knowledge or experience of the business to do so.

If retained, the Duty champion should be very involved in designing the format of the board report, agreeing what MI and data should be included and act as a point of contact between the board and whoever is drafting the board report in agreeing the information that the board wants to see. They can also help to eliminate any roadblocks in getting access to the information. If there is no Duty champion, the board report should be driven by the other Board members or at least the ExCo. This is to make sure that it is adequate from the FCA’s perspective and also that it contains the information that the Board wants it to see.

Firms should ensure that board-level challenge is clearly documented to demonstrate meaningful scrutiny and to hold senior management accountable. Firms should back this up with detailed board minutes to provide records of all discussions and follow-up actions. They should also approve the board report before it is finalised and presented to the board. The Duty champion should present the board report and they may want to ask the compliance officer and perhaps a senior manager from the front line to present to the board with them. Firms should continue to monitor the FCA's updates to FG22/5 for the revised guidance and direction on approach (see also section 1.5).

2.3 Consider lines of communication between all stakeholders

Open and transparent communication among stakeholders is essential when preparing the board report. Providing regular updates, lines of reporting and highlighting when tasks are completed or where actions are required will encourage collaboration across the teams involved in getting the draft board report ready.

2.4 Set the date of the board meeting

Firms should put a date in the diary for the board meeting as early as possible to ensure that all members are in attendance. It is best to get the date agreed in advance to allow the board time to consider the board report contents prior to the end of July deadline (given the start of the July holiday period and the fact that some firms do not have board meetings in the summer months). It is best to get a date agreed as early as possible, as the FCA are likely to challenge firms who do not meet the July deadline.

2.5 Who is responsible for signing off compliance with Consumer Duty requirements?

Boards approving the board report will also need to agree on actions where ‘poor outcomes’ or weaknesses in processes have been picked up (eg, during testing of communications or price and value reviews). Firms are expected to analyse outcomes across different customer groups and learn from them. Early engagement with the board on specific areas is necessary to enable them to make an informed decision. This is in line with PRIN 2A.8.5R.

It is likely to be the chair of the board (on behalf of the other board members) who signs the actual board report. It should, however, be noted in the minutes that the board report was presented at the meeting, and that the members agreed for the chair to sign it off. If there are any actions arising, they should be noted and tracked through to completion by the board.

Firms must be able to show how the Duty is being embedded into the culture of the firm. For smaller firms, the FCA advised bringing in an independent ‘critical friend’ and firms can choose who that might be. This may assist with the assessments and bring objectivity and independence. There are multiple challenges on firms to balance the regulatory requirements alongside day-to-day operations, and to deliver meaningfully firms must prioritise appropriately.

Step 3 – Ensure full compliance for closed products and services

As of 31 July 2024, the Duty now applies in full to closed products and services. These are products and services that were sold prior to 31 July 2023 and have not been marketed or sold to new customers since that date.

Firms are required to ensure ongoing compliance with the Duty across all closed products and services in the same way that they review open products and services, except that they do not need to have a target market or distribution strategy. If existing customers can continue to make payments under the existing product terms, this would be considered ‘closed’ if the product or service is not open to new customers.

For further information, see May 2024 Dear CEO letters.

3.1 Audit closed products and services

Firms with closed products must review these on an ongoing basis, applying the same level of scrutiny as they do for open products.

Existing roadmaps and implementation plans should be revisited and adapted to ensure they remain fit for purpose.

3.2 Consider ongoing compliance challenges

Ongoing monitoring, governance and evidence of good customer outcomes are essential to demonstrate ongoing compliance. Firms need to regularly review their closed products and services against the cross-cutting rules and the four outcomes. The FCA has highlighted several challenges firms commonly face and these are considered below.

3.2.1 Gaps in monitoring data

A core requirement of the Duty is the ability to assess, test, understand and evidence the outcomes that customers are receiving. This is more difficult with closed products where client records are out of date, incomplete or housed on old IT systems which have not been maintained and are no longer accessible.

Firms should consider the reasons why products and services were closed in the first place (eg, poor value for money), and identify high-priority products and services. The FCA has advised firms to take additional steps to mitigate the risk of harm to consumers (eg, through enhanced outcomes testing) where they are unable to fill gaps in their records.

3.2.2 Fair value in closed products and services

Firms must be able to demonstrate that their closed products and services continue to provide fair value to customers and be confident that they do not exploit the customers’ lack of knowledge or behavioural biases. When evaluating fair value, the FCA will consider if the firm complied with the rules in place at the time the product or service was originally sold and consider whether the firm could reasonably have known that its assumptions (eg, about customer behaviour, pricing or product performance) were significantly wrong.

3.2.3 Keeping the customer connection

A key challenge in the closed products review is low customer engagement where lack of engagement leads to:

• customers continuing to pay for products they no longer need or want;
• customers paying for products they are no longer eligible for; and
• customers being unaware of key changes to the product over time, limiting their ability to use it as expected. As noted at step 3, firms are not usually expected to determine the target market and distribution channel for closed products and services. That said, if firms identify (during their review of closed books) that the originally defined target market or distribution channels are causing or could cause customer harm, they should consider how to resolve it. This may include, where possible, suggesting that clients move to another product or service.

3.3 Review action plan to rectify or remediate issues (where identified)

As noted at step 1.7, firms should proactively address any risks and issues identified during their review and put an action plan in place to rectify or remediate them. Firms should keep their action plans under regular review and update as necessary.

3.4 Refer to FCA guidance

Chapter 3 of FG22/5 sets out guidance as to how firms should approach the review of closed products and services including:

• FCA expectations for firms conducting closed product and service reviews (3.7); and
• considerations for firms when reviewing closed books (3.8).

Firms must identify and take action to address any potential harm to customers in the closed products and services. See chapter 3 on assessing fair value and on actions to address potential harm. Where firms are considering withdrawing closed products and services, they must consider the impact this will have on consumer outcomes and ensure they are not causing foreseeable harm.

Regular board reporting on implementation planning and progress is advised. The Duty champion (if retained) should also be keeping a watchful eye on progress to maintain oversight and challenge (see section 1.5). As with open products and services, firms are expected to apply the Duty on a forward-looking basis rather than retrospectively.

Additional resources

Consumer Duty webpage (provides links to final rules, guidance and useful resources)

Related Lexology Pro content

How-to guide:

The FCA’s Consumer Duty: putting the needs of customers first

Reliance on information posted:

While we use reasonable endeavours to provide up to date and relevant materials, the materials posted on our site are not intended to amount to advice on which reliance should be placed. They may not reflect recent changes in the law and are not intended to constitute a definitive or complete statement of the law. You may use them to stay up to date with legal developments but you should not use them for transactions or legal advice and you should carry out your own research. We therefore disclaim all liability and responsibility arising from any reliance placed on such materials by any visitor to our site, or by anyone who may be informed of any of its contents.