FCA Publishes Updates on Clarifying and Streamlining the UK Consumer Duty

On 30 September 2025, the Financial Conduct Authority (FCA) published three updates in connection with the Consumer Duty (the Duty): (i) a letter to HM Treasury (HMT) setting out the application of the Duty for wholesale firms (the Letter); (ii) a webpage on the FCA’s ongoing work to streamline rules and reduce complexity for businesses following the Duty’s introduction (the Webpage); and (iii) a webpage outlining the FCA’s priority areas in relation to the Duty for 2025/2026 (the Priority Webpage). 

Background

The Duty, which came into force on 31 July 2023 for open products and exactly a year later for closed products, was designed to set high and consistent standards of consumer protection across financial services, adopting an outcomes-based approach. While the Duty has led to positive changes in firm conduct and consumer confidence, its application to wholesale firms has raised concerns about proportionality, compliance costs, and the risk of regulatory overreach into activities with limited retail impact.

Specifically, wholesale firms have reported uncertainty regarding the Duty’s relevance to business-to-business activities, particularly where there is no direct relationship with retail customers or where services are provided to non-UK clients. Firms have also highlighted the complexity and cost of complying with overlapping regulatory regimes, and the perceived need to produce extensive evidence of compliance, even where their activities have minimal impact on retail outcomes.

The Letter

The Letter follows HMT’s July 2025 request that the FCA report on how it will address concerns regarding the application of the Duty for firms primarily engaged in wholesale activity. In the Letter, the FCA sets out the following action plan identifying areas where it intends to amend rules relating to the Duty to remove “disproportionate burdens” on wholesale firms: 

1. Clarity on Supervisory Approach: The FCA will provide further guidance on its supervisory approach and expectations under the Duty when firms collaborate to manufacture products for retail customers. 
2. Consultation on Client Categorisation Framework: The FCA intends to publish a consultation later this year on updating its client categorisation framework to establish clearer, up-to-date standards for identifying individuals who can be treated as professional clients. The FCA is also considering the introduction of a new high-asset threshold test for such categorisation. 
3. Consultation on the Application of the Duty: In the first half of 2026, the FCA intends to consult on how the Duty and its requirements apply through distribution chains. In particular, the FCA will review existing exemptions, consider further exclusions for business-to-business activities, and clarify when firms can rely on the work undertaken by another firm in the distribution process.
4. Exclusion of Non-UK Business: Also in the first half of 2026, the FCA proposes to remove business with non-UK customers from the scope of the Duty, recognising the challenges firms face in reconciling UK and overseas regulatory obligations. The FCA will, however, assess the potential impact on UK consumers, including expatriates, before making such proposals.

The Webpage

The Webpage summarises the progress the FCA has made in streamlining certain requirements introduced by the Duty, as well as the further actions it intends to take. Most notably, the Webpage outlines the deliverables, such as consultation papers or policy statements, that can be anticipated in 2025 or 2026. These include, for example, the assessment of value reporting for asset managers, the review of client categorisation rules, and review of the Senior Managers & Certification Regime. 

The Priority Webpage

The Priority Webpage outlines the FCA’s priority areas for 2025/26 in relation to the Duty. These include:

• conducting multi-firm projects across sectors to understand how firms are implementing the Duty and to share examples of good practice;
• collaborating with the Information Commissioner’s Office to provide further clarity on the interaction between the Duty and data protection expectations, with guidance expected in the first quarter of 2026; and 
• reviewing how firms are designing products and services to meet customer needs, as well as evaluating how firms are responding to the FCA’s requirements for outcomes monitoring. 

The Letter, Webpage and Priority Webpage are available here, here and here respectively.