On 16 April 2026, the FCA published its Year 2 reflection on Consumer Duty board reports and signalled what it wants to see in the third cycle. After reviewing 180 first-year reports and 80 second-year reports, the regulator says the Duty is making a difference — but too many firms still produce board reports that are "too high-level" to drive real change.
For FCA-regulated firms preparing their third annual Consumer Duty board report (due by 31 July 2026 for most firms), the message is clear: generic narrative and ticked-box governance will not meet expectations. Evidence, specific customer outcomes data and measurable actions are what the regulator is looking for.
What changes in Year 3
| Area | FCA expectation for Year 3 |
|---|---|
| Board reports | Evidence-rich, outcomes-focused, with clear KPIs and actions |
| Products and services | "Outcome thinking" embedded in product lifecycle, not just launch |
| Fair value | Rigorous assessments with dashboards — not narrative descriptions |
| Customer support | End-to-end customer journey mapping, particularly vulnerability and digital journeys |
| Communications | Clear, understandable; tested against comprehension and action rates |
| Consumer Duty Champion | Role no longer required from 27 February 2025, but can be retained |
| Smaller firms | New "critical friend" guidance; proportionate approach acknowledged |
What a good board report looks like in 2026
The FCA expectations for a compliant and effective board report have crystallised after two full cycles. Essential features:
- Outcome metrics, not activity metrics — "We ran 12 training sessions" is an activity. "Customer complaint volume on pricing clarity fell 23% across the period" is an outcome.
- Segment-level analysis — evidence that different customer groups (age, vulnerability, channel) are getting consistent good outcomes, not just the overall average.
- Clear ownership and action tracking — every issue identified has a named owner, deadline and escalation path.
- Product-lifecycle evidence — not just "we assessed fair value at launch" but ongoing monitoring throughout the life of each product/service.
- Board challenge evidence — documented push-back from non-executive directors on management's findings, with management's response and resolution.
- Future strategy alignment — specific evidence that the firm's future plans are consistent with Duty obligations, not just generic commitment statements.
The smaller firm angle — February 2026 update
On 24 February 2026, the FCA published new guidance for smaller firms, acknowledging they face different resource constraints. Key points for smaller FCA-regulated firms (including many mortgage brokers, small IFAs, and insurance intermediaries):
- "Critical friend" approach — smaller firms without dedicated compliance or audit teams can use a knowledgeable third-party adviser or trade-body support to provide impartial feedback.
- Proportionate structures — smaller firms with narrower customer bases do not need extensive segment-specific policies.
- Use of trade bodies and external experts — trade body guidance, peer reviews and external compliance consultants are all valid inputs.
- Feedback and pilot checks — embed testing directly into customer interactions.
- Cultural fit — document how Duty thinking shows up in day-to-day behaviour, not just in policies.
The FCA has emphasised it is open to "more targeted work where that would be beneficial" — suggesting ongoing dialogue with smaller-firm stakeholders to refine expectations.
Common Year 2 shortcomings
From the FCA's published good-practice and poor-practice notes:
Poor practice
- High-level narrative with no measurable outcomes
- Generic commitment to "continuous improvement" without specifics
- No evidence of board challenge or debate
- Complaints data treated as the sole outcome metric
- No linkage between identified risks and actions taken
- Copy-paste from Year 1 with minimal evolution
Good practice
- Specific KPIs for each of the four Duty outcomes (products and services, price and value, consumer understanding, consumer support)
- Segment-level drill-down showing where outcomes differ between groups
- Quantified improvements against prior-year baseline
- Evidence of cultural embedding through remuneration, incentives and training
- Specific board debate captured in minutes or appendices
- Action tracker with clear ownership and escalation
FCA data-led supervision
The FCA has moved toward a data-led supervisory approach on the Duty. Firms can expect:
- Targeted data requests based on complaints data, claims data and thematic concerns.
- Requests for the board report itself — even though firms do not submit it proactively.
- Cross-sector reviews published quarterly on specific outcomes (consumer support, vulnerable customers, price and value, etc.).
- Use of firm-level performance data published by the PSR (for APP fraud) and other regulators as cross-regulatory inputs.
What firms should be doing now
- Start Year 3 production now — good reports take three to four months to produce with appropriate board cycles, not three weeks.
- Build your outcomes dashboard — move beyond spreadsheets to tools that provide real-time MI.
- Document challenge — capture board debate in minutes and in the report itself.
- Map your customer journey end-to-end — especially for vulnerable customers and digital channels where the FCA has flagged concerns.
- Test your communications — comprehension testing, action-rate analysis and drop-off tracking give hard evidence of consumer understanding.
- Peer benchmark — smaller firms can use trade-body aggregated data; larger firms can commission independent reviews.
Interaction with other regulatory workstreams
Firms should not see Year 3 Consumer Duty work in isolation. Key interactions:
- APP Fraud — PSR's firm-level reimbursement data now feeds Consumer Duty supervision.
- Vulnerable customers — FG21/1 expectations align directly with Duty outcomes.
- Financial Promotions — the Consumer Understanding outcome increasingly drives promotions compliance.
- FCA Strategy 2025-30 — the regulator's five-year strategy places Consumer Duty at its core.
- FCA Strategy on smaller firms — the regulator is developing sector-specific directory guides (pilot work ongoing for credit broking).
Disclaimer
This article is for general information only and does not constitute regulatory or legal advice. The Consumer Duty is set out in the FCA Handbook (PRIN 2A) and associated guidance. Firms should refer to the FCA's own publications and seek qualified compliance advice for their specific circumstances.
FAQ
Do I need to submit my Consumer Duty board report to the FCA?
No. The FCA does not require proactive submission. However, you must be able to provide your report if requested, and must do so promptly.
What is the deadline for the Year 3 board report?
Most firms' financial year aligns with the calendar and Duty annual cycle is typically 31 July. Firms on different governance cycles should refer to their own reporting schedules. The Duty was effective for open products and services from 31 July 2023, and for closed from 31 July 2024.
Can small firms still use a simplified approach?
Yes — the FCA's 24 February 2026 guidance explicitly endorses proportionate structures for smaller firms, including critical-friend reviews and trade-body inputs. Proportionality is not a lower bar for outcomes — the quality must still be there.
