FCA Year 2 Consumer Duty Report: Progress and Key Gaps

UK FCA Publishes Review Findings on Year 2 Consumer Duty Board Reports

Jonathan Pearson, Head of Consumer Policy at the UKFCA, published a blog post on the regulator's official website on 16 April 2026, presenting a systematic review of Year 2 Consumer Duty Board Reports. The article noted that financial services firms have continued to make progress in monitoring customer outcomes, but the quality and depth of analysis remain variable, with improvements needed ahead of the third reporting cycle.

The Consumer Duty rules (PRIN 2A.8.3-5R) require regulated firms to submit annual reports to their governing bodies, setting out what their monitoring has revealed about customer outcomes and what actions they will take as a result. The FCA reviewed a total of 180 Year 1 reports and 80 Year 2 reports in 2024.

Background and Key Milestones of the Consumer Duty Regime

The Consumer Duty is a regulatory framework introduced by the FCA for the retail financial services market. It requires firms to deliver good customer outcomes across four dimensions: products and services, price and value, consumer understanding, and consumer support. Since the publication of the final rules, the regime has been implemented in phases.

Improvements in Year 2 Reports Compared to Year 1

Stronger Governance and Clearer Board Oversight

The FCA noted a meaningful shift in how governing bodies approach the Consumer Duty. According to the review findings published on 16 April 2026, boards now formally review and approve reports, including explicit confirmation that they have considered and signed off relevant actions and that their firms are meeting their obligations.

Many firms chose to retain their Consumer Duty Board Champion after the FCA granted them the flexibility to decide for themselves. Pearson stated that this reflects a recognition that senior accountability is central to cultural change and to embedding the Duty across businesses.

Better Action Plans and Clearer Ownership

An increasing number of firms are setting out comprehensive action plans in their reports, incorporating the following elements:

• Clearly designated accountable owners for each improvement measure, ensuring traceability in execution

• Specific completion timelines, enabling boards to track progress against deadlines

• Progress update records, allowing boards to monitor delivery status more systematically

Broader and More Insightful Use of Data

Compared to Year 1, firms are drawing on a wider range of quantitative and qualitative data to demonstrate customer outcomes. The FCA observed during its review that the strongest reports include trend analysis, root cause assessments, and comparisons across customer groups, while explaining why specific metrics matter and how they relate to customer experiences. Where outcomes fell short, reports described the remedial actions firms had taken.

In addition, more evidence showed that firms are improving how they identify and monitor outcomes for vulnerable customers, including through more refined customer segmentation approaches.

Areas Where the FCA Says Firms Need to Do More

Despite the positive trends seen in Year 2 reports, the FCA found that the quality and depth of analysis remained variable. Pearson outlined four key areas for improvement in his blog post of 16 April 2026.

Clearly Link Data to Customer Outcomes

Some firms submitted extensive data without adequately explaining how it demonstrated good or poor outcomes. The FCA expects boards to drive deeper analysis:

• Move beyond basicMIdashboard presentations to provide substantive insights

• Draw clear conclusions from data and identify emerging risks

• Proactively challenge their own business practices where data suggests customers may not be receiving good outcomes

Strengthen Monitoring of Outcomes Delivered by Third Parties

Monitoring of customer outcomes within distribution chains was often weak, particularly where firms rely on intermediaries or outsourcing partners. The FCA set out clear expectations in this regard:

• Firms must take responsibility for the outcomes their products deliver, regardless of which party interacts directly with the customer

• Third-party outcome monitoring must be reflected in firms' management information, oversight arrangements, and board scrutiny processes

• The FCA plans to consult on changes to distribution chain rules and guidance in 2026, and to publish best practice examples

Provide Sufficient Evidence of Meaningful Board Challenge

Most boards reviewed and approved the Consumer Duty reports, but many failed to adequately document the challenge they had provided. The FCA stated that this makes it difficult for the regulator to assess how senior leaders tested the evidence they were given. Boards should ensure their minutes and papers clearly record:

1. Key discussion points arising from the report content

2. Specific questions raised by board members

3. Follow-up actions required of management

Deepen Assessment of Consumer Understanding and Support

Some reports still focused too heavily on products, services, and value, while giving insufficient attention to consumer understanding and consumer support. However, these two areas are core outcome indicators under the Consumer Duty. The FCA requires firms to evidence their specific approaches in the following areas:

1. Testing customer communications for comprehension

2. Assessing consumers' actual understanding of product and service information

3. Responding promptly when consumer behaviour indicates misunderstanding or friction

Industry Outlook and Regulatory Direction

The FCA noted in its review findings that both Year 1 and Year 2 reports highlighted strong examples of effective practice across the market, including from smaller firms. This demonstrates that meaningful monitoring of customer outcomes and alignment of business strategy with the Consumer Duty is achievable for firms of all sizes.

In his blog post of 16 April 2026, Pearson stated that the improvements observed by the FCA indicate firms are continuing to move in the right direction. With the third cycle of Consumer Duty Board Reports approaching, the FCA expects firms to further strengthen their maturity across outcome monitoring, corporate governance, and distribution chain oversight, to ensure the Duty continues to deliver good outcomes for consumers. The FCA will continue to support the industry by publishing examples of good and poor practice, and by providing more targeted guidance for smaller firms.

(Source: Financial Conduct Authority official blog, 16 April 2026, authored by Jonathan Pearson, Head of Consumer Policy)

Frequently Asked Questions on Consumer Duty Board Reports