Ensuring Fairness in Financial Markets Through Consumer Duty and Regulatory Oversight

Financial markets play a crucial role in everyday life, shaping how people save, borrow, and invest. Yet, these markets can be complex and sometimes unfair, leaving consumers vulnerable to poor choices or harm. The Financial Conduct Authority (FCA) Consumer Panel works to create a level playing field where consumers can make informed decisions and receive fair treatment. Central to this mission is the Consumer Duty, a regulatory approach that puts consumers’ interests at the heart of financial services.

This post explores how the Consumer Duty and regulatory oversight work together to protect consumers, promote transparency, and ensure financial products deliver fair value. We will look at what the Consumer Duty means in practice, why it matters, and how it changes the relationship between firms and customers.

What the Consumer Duty Means for Consumers

The Consumer Duty is a policy initiative designed to improve outcomes for people using financial products and services. Unlike traditional rules that focus on compliance checklists, the Consumer Duty emphasizes outcomes. It requires firms to:

• Design products that meet the real needs of consumers

• Provide clear and accessible information so customers understand what they are buying

• Deliver fair value, ensuring products are not overpriced or misleading

• Avoid foreseeable harm by anticipating risks and acting to prevent them

  
  

This approach shifts responsibility onto firms to think from the consumer’s perspective. It is not enough to meet minimum standards; firms must actively ensure customers benefit from their products and services.

For example, a lender must not only disclose interest rates clearly but also assess whether the loan suits the borrower’s financial situation. If a product is likely to cause harm or confusion, firms must redesign or withdraw it.

The Role of the FCA Consumer Panel

The FCA Consumer Panel acts as a critical friend to the FCA, providing independent advice and representing consumer interests. The panel’s role includes:

• Reviewing proposed regulatory changes to assess their impact on consumers

• Highlighting potential risks or unintended consequences

• Advocating for transparency and fairness in financial markets

• Ensuring consumer voices influence policy decisions

  
  

By working closely with the FCA, the panel helps shape regulations that protect consumers without stifling innovation. This collaboration ensures that new rules like the Consumer Duty are practical and focused on real-world benefits.

Financial advisor helping a client understand product details

Clear communication between financial advisors and clients helps consumers make informed choices.

Why Fair Value Matters

Fair value means that a financial product’s cost reflects the benefits it offers. Consumers should not pay excessive fees or receive products that do not meet their needs. Fair value is essential because:

• It builds trust between consumers and firms

• It prevents exploitation of vulnerable customers

• It encourages competition based on quality, not just price

• It supports long-term financial wellbeing

  
  

For instance, an investment fund charging high fees but delivering poor returns fails the fair value test. Under the Consumer Duty, firms must justify their pricing and ensure customers understand what they are paying for.

Clear Communication as a Cornerstone

Many consumers struggle to understand financial products due to jargon or complex terms. The Consumer Duty requires firms to communicate clearly and transparently. This means:

• Using plain language free of unnecessary technical terms

• Highlighting key information upfront, such as costs, risks, and benefits

• Providing examples or scenarios to illustrate how products work

• Offering accessible support for questions or concerns

  
  

Clear communication empowers consumers to compare options and choose products that suit their needs. It also reduces the risk of complaints and disputes.

Preventing Foreseeable Harm

Foreseeable harm occurs when firms fail to anticipate how a product or service might negatively affect consumers. The Consumer Duty obliges firms to:

• Identify potential risks early in the product lifecycle

• Take steps to mitigate those risks before harm happens

• Monitor products continuously to detect emerging issues

• Act swiftly to correct problems or remove harmful products

  
  

For example, if a credit card company notices a pattern of customers struggling to repay debts, it should adjust lending criteria or offer better support rather than waiting for complaints.

Practical Examples of Consumer Duty in Action

• Insurance products redesigned to exclude confusing terms and clearly explain coverage limits.

• Savings accounts with transparent fees and no hidden charges, making it easier for customers to compare.

• Mortgage advice tailored to individual circumstances, ensuring borrowers understand long-term commitments.

• Investment platforms providing risk warnings and educational resources to help users make informed choices.

  
  

These examples show how the Consumer Duty encourages firms to put consumers first, improving trust and satisfaction.

Really proud to see that we are making a difference. If you have a financial regulation query related to personal financial products then do contact us. Fintechs and other market entrants should feel comfortable with implementing the Duty throughout their product development approach, implementation and marketing.