From compliance to culture: Elevating the Consumer Duty Board Report

While many stakeholders have highlighted its positive impact on customer outcomes, others, including voices in the recent House of Lords Financial Services Regulation Committee report [1], have raised concerns about the complexity and ambiguity of the rules, making Consumer Duty compliance a challenging task for some firms.

Despite these challenges, one thing remains clear: the Financial Conduct Authority (FCA) views the Consumer Duty as fundamental to how regulated financial firms should treat their customers. The Duty is a cornerstone of the FCA’s long-term strategy, with its importance reiterated repeatedly in supervisory communications. The regulator has made it clear that firms must not ease off on their commitment to continuous improvement, even in the context of wider government priorities such as economic growth. Embedding the Duty into everyday business practices is not just a compliance requirement; it is a “cultural” expectation.

With the second Annual Board Review due at the end of July, and following the FCA’s December 2024 publication [2] of insights on good practice and areas for improvement, we share our key observations and practical considerations, drawn from our ongoing work with firms navigating the Duty in day-to-day operations.

How to improve your firm's Consumer Duty Board Report

Many organisations have made meaningful progress since the first year of the Consumer Duty’s implementation. However, there remain several critical areas where further improvement is needed to ensure continued Consumer Duty compliance.

Good customer outcome definitions

Some firms continue to face challenges in clearly defining what constitutes a ‘good outcome’ for customers — a fundamental aspect of the Duty. Without clear definitions, it becomes difficult to design effective management information (MI) to measure outcomes accurately or to pinpoint areas requiring corrective action. One area that has proven particularly complex is articulating what good outcomes look like in the context of fair value, where firms are still refining how to assess and evidence that customers are receiving fair value across different product lines.

Data and data quality

The ability to capture, test, and use data effectively remains another common hurdle. Organisations are grappling not only with determining which data points are most appropriate to support their Consumer Duty assessments, but also with validating the quality of that data. This challenge is often rooted in and compounded by the ambiguity around customer outcome definitions. In particular, measuring Consumer Understanding poses a high bar, requiring thoughtful metrics, ongoing testing, and interpretability. Encouragingly, many firms have dedicated significant focus over the past year to improving their data quality frameworks, recognising that reliable data is the cornerstone of any credible Consumer Duty MI.

Governance

One area where we continue to observe variation across firms is in the governance arrangements supporting the preparation and review of the Consumer Duty Board Report. While some organisations have implemented robust review processes — with clearly defined roles, thorough stakeholder input, and strong internal sign-off mechanisms — others have not established sufficient checks and balances. In certain cases, the process lacks adequate documentation or formal oversight, raising questions about the extent to which the report has been meaningfully reviewed before being submitted to the Board for approval. This inconsistency risks undermining the purpose of the Annual Board Report, which is to demonstrate how the firm is meeting its obligations under the Duty and to support effective challenge and accountability at the Board level.

Implementing actions

Many organisations have demonstrated strength in their Consumer Duty Board Reports by identifying areas requiring improvement. This practice aligns well with the Duty’s proactive and outcomes-focused ethos. Firms are generally candid in surfacing gaps and acknowledging where further progress is needed. However, the opportunity for improvement often lies in what follows: the development of a clear, structured action plan. In many cases, firms could enhance their approach by ensuring that action plans are underpinned by clearly assigned ownership, realistic deadlines, and ongoing tracking mechanisms. This level of rigour enables Boards not only to review and approve the plan, but also to actively monitor progress, challenge delays, and hold relevant teams accountable for delivery.

Key considerations for assessing the Consumer Duty Board Report

Organisations should reflect on several critical considerations to ensure the report is both meaningful and actionable.

Follow-up on prior year findings

Begin by revisiting last year’s Consumer Duty Board Report. Identify the areas previously flagged for improvement and evaluate the status of any actions taken. Have these actions been completed, delayed, or deprioritised? Importantly, assess whether any failure to address these issues could have led to customer harm in the current reporting cycle. Boards should be prepared to challenge whether lessons from the past year have meaningfully informed this year’s assessment.

Data adequacy and evolution

Data remains central to a robust Consumer Duty assessment. Boards should challenge whether the data used is accurate, comprehensive, and fit for purpose. In addition, they should seek to understand any enhancements made since the previous report, both in terms of scope and quality. If changes were introduced, such as the use of new metrics or technological solutions for data collection, these should be tested and validated. For instance, changes in capturing Consumer Understanding or Fair Value data need a clear rationale and evidence of reliability.

Continued oversight from 2^nd and 3^rd line functions

Following the first year of implementation, where the second and third lines of defence played a pivotal role in embedding the Duty, it is essential to consider whether this oversight has remained active. Are internal audit and compliance teams continuing to carry out in-depth reviews to test whether good outcomes are consistently being delivered across the customer journey?

Strategic alignment in a changing environment

In today’s dynamic economic and market landscape, strategy cannot remain static. Firms should consider whether their forward-looking strategy continues to align with the Duty's expectations. Does the evolving business model — including product, pricing, and distribution decisions — still enable the delivery of consistently good customer outcomes?

Contact our experts for Consumer Duty support

Our expertise in supporting firms with the Consumer Duty spans a wide range of areas, from strategy and governance through to data, MI, and customer outcomes. We understand the complexities involved with the Consumer Duty and offer a comprehensive range of support, tailored to a firm’s specific needs and circumstances.

Contact us today

[1] https://publications.parliament.uk/pa/ld5901/ldselect/ldfsrc/133/133.pdf

[2] https://www.fca.org.uk/publications/good-and-poor-practice/consumer-duty-board-reports-good-practice-and-areas-improvement