FCA enforcement of the Consumer Duty – What do we know?

The publication of the FCA’s first Enforcement Watch attracted significant attention. FCA Co-head of Enforcement Therese Chambers had been at pains in recent speeches to emphasise that, whilst the number of published outcomes might have dropped, plenty of enforcement activity was taking place “behind the scenes.” Enforcement Watch represented the first real articulation of what that behind-the-scenes activity looks like.

Of note was the description of work the FCA has been doing to enforce the Consumer Duty. Since its introduction in 2023/24, the FCA has been somewhat coy about enforcing the Duty. We have seen the FCA use it as a lever to ‘encourage’ firms to make changes it wanted to see without the time and expense of an enforcement investigation - something of a ‘win-win’ for the regulator. A preference for supervision over enforcement is also consistent with current enforcement policy, which looks to confine full investigations to only the most serious cases. 

Given that, it was perhaps a surprise to read that the FCA is investigating six potential beaches of the Consumer Duty’s fair value rules.  It also confirmed that, in some Consumer Duty cases, the FCA has used supervisory tools, including voluntary or own-initiative requirements, to protect consumers while investigations continue.

Six consumer duty investigations into fair value 

• Value assessments are inherently contestable, and something firms can struggle to articulate. Much of the FCA’s early Consumer Duty activity concerned the price and value outcome, for example, temporary restrictions in the GAP insurance market; interest rates on savings accounts; and challenging business models in which firms were being charged for ongoing advice they were not receiving. In all of these early cases the FCA was able to achieve the outcomes it was looking for without opening a formal enforcement investigation.

• What is not yet clear is whether these new enforcement cases represent the FCA tackling 'low-hanging fruit' (that is, areas about which they have had concerns for some time), or whether they involve new concerns that have come to light more recently. Two of the cases are said to involve insurance firms, which have been obliged to assess the value of their products since before the Duty came into force.  FCA concerns in this area are nothing new - the firms in question may simply have been unable, or unwilling, to make the changes the FCA wants to see.  

• The second - related - point is the degree of harm here. Is the FCA only using enforcement for the most egregious cases of alleged Consumer Duty breaches, or will these cases prove more finely balanced than that?

Use of supervisory tools to protect consumers 

• Recent years have seen the FCA pivot away from full enforcement investigations towards greater use of its supervisory tools. This was driven by necessity when case numbers were high - enforcement was simply far too slow - but FCA work on the Duty in the insurance space gives a flavour of the 'settled state' now that case numbers are back down to sensible levels.

• Again, we see insurance providing clues about the FCA's approach here. The FCA's market studies into the pure protection and premium finance sectors, and its response to the Which? super complaint concerning travel and home insurance, provide crucial insight into how the FCA is using its supervisory tools both to preserve the status quo whilst issues are resolved, and as an end in themselves.

Lessons from insurance – the Which? super complaint

The FCA’s response to the Which? super complaint gives us perhaps the greatest insight to date into the way in which the FCA is proactively using the Duty to tackle consumer harm. 

In September 2025, Which? exercised its statutory power to submit a formal super-complaint regarding certain features of the consumer home and travel insurance markets that it considered were significantly damaging the interests of consumers. This included an assertion that the FCA had failed to make sufficient use of its enforcement powers, despite clear evidence of breaches of its rules. Naturally, the FCA’s response defends against this charge by emphasising its ability to resolve consumer harm without resorting to its enforcement powers. 

The FCA elected not to open a market study in response to the complaint; however its response sets out several examples of how the FCA has been using the Duty to drive better outcomes for consumers.

• One insurer which reached a "voluntary agreement" with the FCA to place restrictions on the growth of its business while it improved its treatment of customers.

• Markerstudy had restrictions imposed on customer numbers and capital across its operations until it resolved FCA concerns stemming from rapid acquisition-fuelled growth, including weaknesses in its leadership, governance and financial controls.

• For one insurer, identified as an outlier in terms of rates of claim rejections, walkaways and complaints in relation to its home buildings and contents policies, the FCA undertook the following:

  • Requested information, meetings and follow‑up engagement which determined that an outsourced claims handler had been responsible for issues in claims handling. This in turn revealed weaknesses in the insurer’s oversight arrangements. 

  • Determined that the firm needed to speed up change and prioritise improvements and ensured that the firm committed to a package of improvements, including: 

    • conducting and scheduling audits of the outsourced administrator; and

    • enhancing internal management information and key performance indicators for claims handling.

• A principal firm that had failed to adequately oversee and monitor its appointed representatives faced proactive supervision, after which it agreed to restrict its permissions, terminate its relationship with appointed representatives and refrain from appointing any new ones.

Lessons for other sectors

It seems unlikely that the FCA will take a different approach to using the Duty to tackle harm in other sectors, so its early work in insurance has implications for the rest of industry. In terms of trends emerging:

• Harm eventuating from poor oversight (of outsourcees, appointed representatives and others) features prominently. Expect this to attract attention in other sectors. Outsourcing to unregulated providers is a particular challenge which requires careful monitoring and consistent review. Firms currently outsourcing the production of PRIIPS to unregulated providers, who intend to use the same cohort to draft their CCI product summaries, should take particular note. Regulated firms will remain responsible for whether their new product summaries meet the Duty. Firms need to be able to demonstrate (with evidence) that any outsourced aspects of their products or services aimed at retail consumers are delivering good outcomes. 

• The FCA continues to investigate outliers, as Therese Chambers said it would (see also here).

• If the FCA can get the result it wants without enforcement, it will. This does not mean that firms are in for an easier ride. Business restrictions can cause significant harm, and ongoing engagement with supervisors is potentially no less of a drain on management time than an investigation. The FCA seems committed to taking firms through a system of graduated response when it encounters consumer harm, working through its supervisory toolkit and pursuing engagement that will become increasingly ‘assertive’. 

For Consumer Duty breaches, early signs are that formal enforcement will be more of a last resort when all else fails; where the harm is so severe it demands a penalty; or where there is a message that needs to be communicated to the market. This approach to enforcement may mean that the FCA is more committed to achieving an outcome once it has opened a formal enforcement action than might previously have been the case. 

It has never been more important for firms to approach supervisory discussions about potential breaches of the Duty with care and rigour. The firms that do best in this ‘brave new world’ will be those who have clearly articulated how their products are meeting all aspects of the Consumer Duty, have evidence to support this, and are pro-active about identifying and remediating harm.