Simplifying FCA Requirements: A New Era of Consumer Duty

The Financial Conduct Authority (FCA) has launched an ambitious programme aimed at simplifying regulatory requirements for firms, following the introduction of the Consumer Duty. The latest Feedback Statement FS25/2 outlines immediate actions and future plans to streamline their rules and guidance, making them more efficient, flexible, and easier to navigate.

Key Highlights:

1. Targeted Simplification: The FCA is committed to reducing complexity in their regulations, focusing on discrete areas rather than a wholesale review. This approach ensures that firms can innovate and tailor their services to meet consumer needs more effectively.
2. Enhanced Flexibility: The new framework will allow firms to leverage technology and modernise customer journeys, particularly for vulnerable customers. This flexibility aims to foster innovation and improve consumer understanding.
3. Reduced Administrative Burden: By providing firms with more autonomy in applying their requirements, the FCA aims to minimise unnecessary administrative tasks, making compliance more outcomes-focused and efficient.
4. Streamlined Requirements: The FCA will remove outdated rules and simplify complex areas, reducing regulatory costs and providing greater clarity on their expectations.

Immediate Actions:

• Mortgage Rule Review: Simplifying responsible lending and advice rules to support better customer outcomes.
• International Conduct Rules: Reviewing the application of FCA regulations for UK-based firms serving customers outside the UK. This will start with the insurance sector and will examine whether conduct rules should apply to firms serving customers outside the UK.
• Consistency in Definitions: Standardising core definitions to reduce compliance costs.

Future Plans:

• Advertising Consumer Credit: Updating financial promotion rules to align with the Consumer Duty.
• Insurance Pricing Rules: The FCA will review the reporting requirements introduced under the general insurance pricing practices intervention.
• Insurance and Funeral Plans: Consulting on changes to simplify rules and enhance competitiveness. This will include allowing firms greater flexibility over how often they review product value and removing the specified minimum hours of training and development required for insurance employees.

In the summer of 2025, there will be further consultations on the changes to insurance rules, including product governance and training requirements. The FCA will also publish a further statement to outline their full programme of work in September 2025.

What Firms Should Consider Doing:

As a result of this paper, firms should consider the following actions:

Engage with the FCA:

• Provide feedback on the proposed changes, especially in areas where the FCA is seeking further input, such as the international application of conduct rules and the simplification of insurance regulations.

Prepare for Upcoming Consultations:

• Stay informed about the upcoming consultation papers and discussion papers, particularly those related to insurance sector reviews and consumer credit advertising rules. Be ready to participate and provide feedback.

Simplify Compliance Processes:

• Begin reviewing current compliance practices to identify areas where simplification and flexibility can be applied, in line with the FCA’s new outcomes-focused approach.

Leverage Technology:

• Explore opportunities to innovate and improve customer-facing communications and journeys, taking advantage of the increased flexibility allowed by the Consumer Duty.

Focus on Vulnerable Customers:

• Tailor approaches to better serve customers with characteristics of vulnerability, ensuring that regulatory changes support good customer outcomes.

How We Can Help

There has been an abundance of FCA communications recently, and it’s fair to say that firms would be forgiven for getting lost in all the messages and changes being proposed by the regulators. We can help firms navigate these changes in many ways, including providing expert analysis and interpretation of the FCA’s new requirements and proposed changes, and helping firms understand the implications for their operations.

We can also help firms in developing strategic plans to align with the FCA’s outcomes-focused Consumer Duty, ensuring compliance while optimising business processes. We can help you identify and implement process improvements to simplify compliance with FCA regulations, reducing administrative burdens and enhancing efficiency.

Please get in contact should you wish to discuss this recent publication or any of the others that have recently been published.