The Consumer Duty applies to the regulated activities and ancillary activities of all firms authorised under the Financial Services and Markets Act 2000, the Payment Services Regulations 2017 and E-money Regulations 2011, in respect of products and services for prospective and actual retail customers.
If your firm offers such products and services, you are required to ensure you meet the Consumer Duty by establishing clearer and higher standards and prioritising customers’ needs in all of your operations. The Financial Conduct Authority (FCA) unveiled its vision in July 2022, and in October 2022, we explained in our article, ‘FCA’s paradigm shift: Consumer Duty’,the requirements of the new Consumer Duty and the necessary steps for preparation.
This article provides an overview of the timeline and considerations relevant to the final phase for closed products and services, which came into effect on 31 July 2024. Ensure your business stays compliant with the latest regulatory changes. Our financial services solicitors can provide expert guidance on navigating the Consumer Duty.
Contents:
Who are ‘retail customers’?
The ‘retail customer’ definition aligns broadly with the scope of the FCA Handbook or relevant regulations in each sector. For example:
- for consumer credit, the Duty applies to all regulated credit-related activities.
- for deposit-taking activities, the Duty applies to consumers, micro-enterprises, charities with a turnover of less than £1 million and a natural person acting in a capacity as a trustee if acting for purposes outside their trade, business or profession (in line with the ‘banking customer’ test in the Banking Conduct of Business Sourcebook (BCOBS)); and
- for payment service or e-money providers, the Duty applies to business conducted with consumers, micro-enterprises and small charities (where the definitions of these terms are the same as for deposit takers, as noted above).
Consumer Duty timeline
Implementing the principles of Consumer Duty proceeded on a phased basis, as recognised by the FCA, acknowledging the complexity of embedding these principles. The first phase, applying to open products and services, came into effect on 31 July 2023, while the second phase, covering closed products and services, took effect on 31 July 2024.
The FCA has consistently reinforced that Consumer Duty is “Not just once and done.” While firms were required to implement its principles by the respective deadlines, ongoing work remains essential. Businesses must continue to review, refine, and enhance their approach to ensure full compliance and continuous improvement in customer outcomes.
Additionally, off the back of an FCA announcement on 27 February 2025, you are no longer required to appoint a Consumer Duty champion - a role initially designed to ensure senior executive oversight of compliance with the new standards. Moving forward, the FCA has emphasised that you should focus on integrating Consumer Duty principles into your core governance structures to sustain compliance and best practices.
Distinguishing between open products and services and closed products and services
Open products and services refer to new and existing products that were manufactured, marketed, or distributed to retail customers before 31 July 2023 and have remained available for sale or renewal beyond that date.
Closed products and services are those that were no longer marketed or distributed to retail customers on or after 31 July 2023 and are not open for renewal.
Final phase: closed products and services
With the initial implementation of Consumer Duty now complete across both open and closed products, you may have encountered unique challenges in this final phase for closed products. Unlike open products, you may have found that some historical product information required was unavailable from when the product was originally manufactured for example, and or where past product designs didn’t consider the level of detail now required under the Duty.
To comply with Consumer Duty, you needed to develop an implementation plan that was robust and achievable. The core steps in this process included:
- Scoping: You likely built on the work already done for open products to assess what fell within the scope of closed products. This approach helped ensure consistency across your firm’s compliance efforts.
- Reviewing: You needed to develop a process to review products and services to ensure they still offered fair value. This involved analysing key factors such as the target market, distribution strategy, pricing, product complexity, and any historical complaints or known issues.
Instead of reviewing each product and service individually, the FCA recommended aligning the treatment of similar products, i.e. those designed to meet the same customer needs and serve a similar customer base.
Additionally, the FCA advised prioritising the review of products or services that posed a higher risk of consumer harm, particularly those that received complaints about pricing and value. - Strategy for product treatment: Once you identified risks, you need to implement mitigation strategies. This could involve improving a product or service to bring it into compliance or, in some cases, discontinuing it altogether. A gap analysis often helped inform these decisions, weighing factors such as cost implications and the impact on existing customers.
Ultimately, the FCA expected you to justify your decisions, demonstrate how they delivered good consumer outcomes, and take further action if necessary.
Is the Consumer Duty retrospective?
The application of Consumer Duty to closed products does not make it retrospective. The FCA has been clear that you will not be judged with the benefit of hindsight. However, the Duty applies to both open and closed products and services on a forward-looking basis, meaning your conduct will be assessed based on the rules in place at the time.
Conclusion
Implementation of the Consumer Duty has required firms to make significant changes across their operations, from governance to product design, to meet the FCA’s higher standards of consumer protection. As the final phase came into effect in July 2024, many firms likely built on their preparations for open products to navigate the challenges of closed products.
Now that the focus is on maintaining compliance through continuous monitoring, regular reviews, and fully embedding Consumer Duty principles into your everyday operations, you need to demonstrate how you deliver good consumer outcomes, address emerging risks, and adapt to evolving regulatory expectations.
If you need expert guidance, our financial services solicitors are on hand to provide prompt and experienced advice if you need it.
