The FCA publishes Consumer Duty papers on the application to wholesale activity

On 30 September 2025, the FCA published three papers on the Consumer Duty:

1. A letter to Rachel Reeves fulfilling its Mansion House commitment to address concerns about the application of the Consumer Duty for firms primarily engaged in wholesale activity.
2. Consumer Duty requirements review: update, setting out the FCA’s progress following the publication of its Call For Input in July 2024.
3. Consumer Duty focus areas for 2025/2026.

There is considerable overlap in all three papers but the most noteworthy is the letter to Rachel Reeves (even though it doesn’t say substantively much at all, promises of future work are interesting).

1. FCA letter to the Chancellor

The application of the Consumer Duty to wholesale firms and activities has been challenging for firms since its inception. The Consumer Duty applies to a firm’s “retail market business” which captures a manufacturer of a product marketed and sold to retail customers (or forming part of another product or service sold to retail customers). Some limited exclusions apply including for certain traded instruments if they meet specific criteria.

The Chancellor had sought clarity from the FCA in relation to some firms’ concerns over the application of the Consumer Duty in wholesale markets, particularly in relation to:

• challenges where retail customers are outside the UK;
• how the Duty applies across a distribution chain; and
• the burden of showing activities have no material impact on a retail customer and the related compliance costs.

The FCA noted that some firms’ “conservatism” has led them to sense a retail approach to regulation of wholesale firms. The FCA wants to “correct this”. A clear way to do so would be to set out with clarity what the FCA considers to be the correct approach to the application of the Consumer Duty on wholesale firms. And the FCA will. But just not yet.

Instead, they set out a four-point action plan to bring this much needed clarity to the market.

1. The FCA will seek to reduce the potential for misunderstanding leading to increased compliance costs and duplication of efforts, by providing clarity on its supervisory approach and expectations. [Expected 2025]
2. The FCA will consult on an update to its client categorisation framework. (This one was already in the offing.) The FCA suggests that HMT might want to think about changes to the FPO and FPO CIS to dovetail with this work. [Expected 2025]
3. The FCA will consult on changes to rules on the application of the Consumer Duty through distribution chains and whether further exemptions should be introduced. Here they suggest potential changes to make clear when and how firms can rely on each other where firms design and sell structured products. [Expected 2026]
4. The FCA will propose removing business with non-UK customers from the scope of the Duty. This would be an important point, if actioned. [Expected 2026]

2. Consumer Duty requirements review: update

The second paper sets out how the FCA is streamlining its rules and reducing complexity which follows its March 2025 Feedback Statement and its July 2024 Call for Input. The FCA also hosted a Regulatory Summit in 2025 during which it sought feedback on its requirements. This paper dovetails with the FCA's letter to the Chancellor setting out some of the deliverables described above.

The FCA confirms that it will:

1. consult on removing business with non-UK clients from the scope of the Consumer Duty, which will be significant for some firms; and
2. review the 'rest' of its core definitions (e.g. retail customer) to promote consistency and clarity. The FCA will share proposals 'through 2026'. We expect this to be an iterative process affecting a number of different sectors and products.

3. FCA consumer duty focus area

The third paper sets out the FCA's priorities for 2025-2026 on the Consumer Duty. One of the messages is that there will be more of the same from the FCA: sharing good and poor practice to help industry; addressing greatest need and harm; getting better data; and identifying opportunities for streamlining rules.

The more interesting part includes the announcement of four cross-cutting projects:

1. review of products and services outcomes;
2. review of firms' approach to outcomes monitoring (this will have an impact on firms' annual Consumer Duty report frameworks);
3. review of firms' customer journey design; and
4. review of the consumer understanding outcome (with a particular focus on the credit card market).

On price and value outcome, the FCA recognises firms' concerns but will be looking at this on a product-specific basis (e.g. pure protection insurance, premium finance, amongst others). Other sector specific focus includes SME business current accounts, some consumer investments and model portfolio services.

The FCA has also announced its engagement with the Information Commissioner's Office to provide clarity on the interaction between firms' approach to vulnerable customers and their obligations under data privacy requirements.

Taken together, this is going to mean 2026 is a busy one for the FCA.

Next steps

Taken forward, these steps could form a significant shift in the application of the Consumer Duty in these markets. But until they are published, the market just has to wait.

Other Authors: Tiegan Cormie, Junior Associate