On the 29th of June 2026, the Financial Conduct Authority (FCA) published its CP26/23 Consultation Paper on its changes to clarify and narrow the scope of the Consumer Duty and make its application more proportionate. The FCA expects to publish its policy statement, together with the final rules, in Q1 2027.
The proposals address concerns that the Duty has extended beyond its intended retail focus, particularly where firms undertake predominantly wholesale or cross-border business. They will be relevant to firms that manufacture or distribute products and services for retail customers but are intended to exclude wholesale counterparty relationships that have no material connection to retail customer outcomes.
Key proposed changes
The FCA proposes targeted amendments to the PRIN rules and related non-Handbook guidance. These include:
- Removing business with non-UK customers from the scope of the Duty to avoid double regulation and create a level playing field between UK firms and their international competition.
- Clarify key concepts by simplifying the definition of “product”, moving the definition of “retail market business” from the Glossary into the rules and clarifying the application of the “material influence” concept.
- Clarifying that multiple firms performing different roles may form part of the same distribution chain and that such firms are only required to comply with the requirements in PRIN2A.3 to PRIN2A.6 that are relevant to the role, process or step they perform.
- Bringing together all relevant provisions relating to the Duty’s scope under a new PRIN 3A chapter.
- Excluding certain activities from the scope of Duty, including wholesale activities with no connection to retail consumer outcomes. These exclusions would be non-exhaustive.
- Clarifying the interaction between the Duty and existing product governance requirements.
What is the intended impact of the proposed changes?
The proposals are intended to reduce unnecessary compliance costs and operational complexity, particularly for wholesale firms, firms operating in complex distribution chains, and businesses serving non-UK customers.
By providing clearer boundaries around when the Consumer Duty applies, firms should have greater certainty when assessing their obligations and be less likely to apply the Duty more broadly than intended.
Firms may also be able to place greater reliance on other parties within the distribution chain, reducing duplication of monitoring, testing and information-sharing activities.
While the FCA does not intend to weaken consumer protection, the proposals seek to focus the Duty more closely on circumstances where firms can materially influence retail customer outcomes. This is expected to create a more proportionate and predictable regulatory framework while maintaining protections for UK retail consumers.
Capital view
The CP26/23 has been welcomed as a positive step towards a more proportionate Consumer Duty framework, particularly through the exclusion of non-UK customers from the scope. It also aligns with the FCA and the Government’s wider push to make UK firms internationally competitive while reducing the regulatory burden.
A clearer and proportionate allocation of responsibility according to each firm’s activities within the distribution chain and less duplication will be beneficial to insurers, MGAs and distributers. However, it could be argued that the FCA could go further by rationalising insurance-specific product governance requirements and allowing insurers to place greater reliance on brokers and MGAs within distribution chains as they may be better placed to carry out fair value assessments.
With the final rules expected in Q1 2027, it would be prudent for firms to assess the proposed changes set out in the Consultation Paper and map their products, customers and distribution arrangements against the proposed scope of the Consumer Duty and identify any current processes that may no longer be necessary.
How can we help?
If you would like to discuss how the proposed changes may affect your business or arrange a review of your Consumer Duty arrangements, please get in touch.
Charlotte Gregory
Partner
Business Crime and Investigations, Consumer Credit, Cryptoassets, FCA Investigations, Financial Services
Charlotte provides strategic advice to clients operating within the financial services sector, supporting businesses at every stage of a firm’s growth and development. She works with clients incl... Read More
Bo Kay Fung
Senior Associate
Cryptoassets, FCA Investigations, Financial Services, FinTech, Insurance Innovation
Bo is a Senior Associate in the Financial Services team. Bo is a barrister with over 12 years’ PQE, with extensive FCA experience.... Read More
Ankit is a Solicitor in our Financial Services team. Prior to joining Capital, Ankit acquired his qualifying work experience in the Financial Services Regulatory team of a City law firm and complet... Read More
Drew is a Trainee Solicitor in our Financial Services team. Drew studied LLB Law at the University of Birmingham.... Read More
