Consumer Duty reports improve, third-party oversight lags
The Financial Conduct Authority (FCA) reports that firms have improved their Consumer Duty Board reports in year two, particularly in governance and action plans. However, the regulator identifies areas needing more attention, such as linking data to outcomes and monitoring third parties.
Stronger governance, better data
Firms are demonstrating a meaningful shift in their approach to the Consumer Duty, with governing bodies now formally reviewing and approving reports.
This includes explicit confirmation that Boards have considered and signed off actions, ensuring firms meet their obligations.
Many have retained their Consumer Duty Board Champion, reflecting a recognition of senior accountability in embedding the Duty.
Comprehensive action plans with clear responsibilities, timelines, and progress updates are increasingly common, allowing Boards to monitor progress systematically.
Firms are also utilizing a broader range of quantitative and qualitative data, including trend analysis and root cause assessments, to demonstrate customer outcomes and improve monitoring for vulnerable customers.
This progress shows the Duty is making a tangible difference in firms' understanding of customer experiences and their responsiveness to issues, leading to better products and support.
Closing the outcome analysis gap
Despite progress, the quality and depth of analysis in year two reports remain variable.
The FCA urges firms to clearly link extensive data to specific customer outcomes, moving beyond mere management information dashboards to provide genuine insights.
A critical area for improvement is the monitoring of outcomes delivered by third parties, where oversight in distribution chains is often weak.
Firms must take proportionate responsibility for their products' outcomes, regardless of who interacts with the customer, and reflect this in their oversight arrangements.
Furthermore, many Boards have not adequately documented their challenge to the evidence presented, making it difficult to assess senior leaders' scrutiny.
Reports also need to deepen their assessment of consumer understanding and support, which are core outcomes under the Duty, by evidencing how communications are tested and how firms respond to consumer misunderstanding.
The FCA plans to consult on changes to rules and guidance relating to distribution chains this year.
Progress, but the real work continues
The second year of Consumer Duty Board reports confirms the regulation is fostering positive change in firm behavior and customer outcomes.
Yet, the FCA's findings underscore that many firms are still navigating the transition from compliance to genuine outcome-focused reporting.
The identified gaps, particularly in third-party oversight and documented Board challenge, highlight areas where the Duty's spirit is not yet fully embedded.
For the Duty to truly deliver its promise, firms must move beyond presenting data to actively challenging practices and ensuring accountability across the entire value chain.