Consumer Duty update: The FCA clarifies its fair-value expectations

What makes a financial product good value? Not simply a competitive headline price, a clearly worded contract or a completed compliance checklist. The key question is whether the total cost to the customer is reasonable, relative to the benefits they can expect.

The FCA’s "Fair value in consumer finance" publication, issued on 29 October 2026, examines how firms are answering this. It shares supervisory findings under the existing Consumer Duty framework; it does not introduce new requirements or prescribe particular actions.

The Consumer Duty has economics at its heart. Assessing value means understanding costs, benefits, incentives and how people actually use products. It also means recognising that customers do not always have the information, time or confidence needed to navigate complex choices. Disclosure matters, but making a charge visible does not, on its own, establish that it represents fair value.

The strength of an outcomes-focused approach is that it asks what happens in practice, rather than stopping at whether a process was followed. This is not a move away from conduct regulation, but it makes customer outcomes the test of whether firms’ conduct, products and controls are working. A well-designed policy is a starting point, not evidence of success.

Nor does fair value mean the lowest price. Different products can legitimately offer different combinations of service, flexibility and support. The analytical task is to establish whether those benefits justify the total price for the customers concerned. Firms’ costs and commercial returns can inform that assessment, but neither a cost-based justification nor a comparison with competitors answers the customer-value question on its own.

The FCA’s 29 October 2026 publication draws on consumer finance supervision to explain good and poor practice under the existing price and value outcome in PRIN 2A.4 and Chapter 7 of FG22/5. The examples do not create new requirements or prescribe specific actions: Firms should exercise judgement and take a proportionate approach for their business, products and customers.

The FCA found that stronger assessments linked total customer costs to reasonably expected benefits, supported conclusions with coherent evidence and examined outcomes across customer groups. Weaknesses included unsupported assertions, incomplete or outdated evidence, overreliance on headline-price comparisons and insufficient scrutiny of repeat charges.

Firms should not review existing fair-value assessments against these findings, and prioritise gaps that could affect customer outcomes.

We’ve identified five priority actions to help firms put the FCA’s supervisory messages into practice. Findings from these reviews should inform discussion at the appropriate governance forum, with clear owners and timescales for improvements. Where poor value or foreseeable harm is identified, firms should act promptly and monitor whether corrective measures are effective.

The aim is better-evidenced decisions and improved customer outcomes, not simply to produce a longer assessment document.

Headline prices can tell an incomplete story. Firms should consider total financial costs, including contingent and repeat charges, alongside non-financial costs such as time and effort. Benefits should be assessed realistically, with attention to how value changes through the product lifecycle. For example, a low initial charge may reveal little about the experience of a customer who incurs fees repeatedly. The relevant question is the cumulative cost relative to the benefits reasonably expected, not whether each fee appears modest in isolation.

A product-level average can conceal materially different experiences. Segmentation by usage, pricing, credit risk or vulnerability can help firms identify who receives the benefits and who bears the costs. This does not imply that every customer must receive an identical outcome. It does mean that firms need to understand differences and investigate whether particular groups receive poor value. Economic analysis helps distinguish meaningful differences from averages that obscure more than they reveal.

Market comparisons are useful, but only if like is compared with like. Product features, service quality, customer characteristics and total charges can all affect the interpretation. A higher price may warrant investigation rather than automatically indicate poor value. Equally, a price close to the market average does not establish fair value.

Firms should use benchmarking to test their reasoning, not as a substitute for assessing their own proposition and customer outcomes.

Clear, timely information about fees is important, but firms also need to consider whether customers understand it. Similarly, measures such as grace periods, charge limits, waivers and refunds need to be assessed for their effectiveness in preventing foreseeable harm. The existence of a control is not the same as evidence that it reaches the right customers, operates consistently or addresses the underlying problem.

Collecting data is not enough. Firms need relevant indicators, a basis for identifying concerns and clear arrangements for investigation and action. Monitoring should show what the evidence means and whether interventions improve outcomes. Proportionality matters: A smaller business may need a simpler framework, but simplicity is not a justification for unsupported conclusions.

Sharing lessons from supervision is a welcome feature of an outcomes-based regime. Principles leave room for judgement, but firms need clarity about what credible implementation looks like. Examples of good and poor practice can provide this without imposing a single methodology on different business models.

The latest publication is evidence of the FCA drawing on supervisory experience to explain its expectations. It should not be mistaken for a change to the underlying fair-value test, or proof that the regulator has completed an evaluation of the Consumer Duty’s wider effectiveness.

Looking ahead, continued engagement with firms and evaluation of which interventions improve outcomes would help the regime evolve on an informed basis. The principle should work both ways: firms should test their controls, and regulators should test the effects of regulation.

For boards and senior management, the immediate priority is to challenge the evidence behind existing fair-value conclusions:

• Can the business explain the relationship between total costs and benefits?

• Does that explanation hold for different customer groups and over time?

• Where concerns emerge, is there a clear owner, a response and a way to assess whether it worked?

Answering these questions not only strengthens regulatory assurance but can reveal product features customers do not use, friction that erodes benefits and pricing structures that create avoidable problems. Bringing economics, data and regulatory expertise together makes fair-value assessment a tool for better commercial decisions, rather than a retrospective justification of existing practice.

The FCA has not rewritten the rules of fair value. It has made the practical challenge clearer: understand the economics of the customer proposition, evidence the outcomes and act on what the analysis reveals.