UK Consumer Duty: FCA Consults on Scope and Proportionality

The Consumer Duty, which came into force in July 2023, is viewed by the FCA as a cornerstone of retail financial services regulation in the United Kingdom. Nearly three years on, however, the regulator has acknowledged that in certain areas the Duty is being applied more broadly and more intensively than originally intended, particularly by firms operating in wholesale markets and complex distribution chains. On 29 June 2026, the FCA published CP26/23, a consultation paper setting out a targeted package of proposed changes to the Duty’s scope and proportionality.

Narrowing the Territorial Reach

A central proposal is to restrict the Duty’s application to retail market business where the customer is ordinarily resident in the UK. At present, firms serving overseas retail clients can face overlapping obligations under both UK and local regulatory frameworks, creating unnecessary cost and complexity. Under the proposed changes, firms conducting business exclusively for non-UK customers would no longer need to apply the Duty to that activity, although certain UK-connected products, such as pre-paid funeral plans and UK pension-related services, would remain in scope. 

Clarifying Where the Duty Applies

The FCA is proposing to consolidate the Duty’s application provisions under a new Handbook chapter, PRIN 3A, to provide firms with greater certainty about which activities fall within scope. It also intends to move away from the “material influence” concept in favour of a framework more clearly linked to a firm’s specific role and extent of involvement with a retail product or service. These revisions are particularly relevant for wholesale firms, which have reported difficulty in assessing whether their activities bring them within the Duty’s reach. 

Proportionality Across Distribution Chains

CP26/23 also addresses how the Duty should apply more proportionately within distribution chains. The FCA proposes to clarify that firms are responsible only for their own conduct and need not oversee or duplicate the compliance activities of other firms in the chain. Obligations around supporting vulnerable customers, monitoring outcomes, and board reporting would be calibrated according to each firm’s role and proximity to the end consumer. 

Next Steps for Firms

The consultation closes on 18 September 2026, with the FCA expecting to publish final rules and a policy statement in Q1 2027. Firms, particularly those with cross-border operations, roles in complex distribution chains, or primarily wholesale activities, may wish to review the proposals and consider responding to the consultation. Even before final rules are made, the direction of travel is clear: the FCA wants the Duty to remain robust in protecting UK retail consumers, but applied in a more targeted, predictable, and proportionate manner. 

CP26/23 can be found here.