The UK’s financial regulator may be preparing to roll back one of its most significant recent reforms — the Consumer Duty.
After facing sustained pressure to ease regulatory burdens and support economic growth, the Financial Conduct Authority (FCA) has outlined a four-point action plan that could mark a major shift in its approach to consumer protection, claims Muinmos.
In a letter dated 29 September 2025 to the Chancellor of the Exchequer, FCA chief executive Nikhil Rathi outlined steps designed to “support growth” and simplify compliance. Among these measures is a potential narrowing of the Consumer Duty’s scope — a move that, if implemented, could amount to a quiet farewell to the framework introduced just over a year ago.
The first proposal seeks to “provide more clarity” around how the Duty applies when multiple firms collaborate to design products for retail customers. This adjustment could reduce the number of institutions subject to the Duty’s oversight. Similarly, the FCA plans to narrow the range of consumers covered under the framework, particularly by updating the client categorisation system.
As part of the update, the FCA intends to lower the thresholds of its qualitative and quantitative tests, allowing more clients to be classified as professionals. According to the regulator, “There is a subset of investors who have the knowledge, experience, sophistication or resources that mean they do not need retail protections.” The FCA also plans to consult in Q4 2025 on introducing a new test based purely on total assets, drawing a “brighter line” for firms when identifying professional clients. With consent, these clients could be excluded from the Duty and other retail protections, enabling firms to reduce costs and expand opportunities in the real economy.
Another notable change would be the removal of non-UK customers from the Duty’s scope. The FCA acknowledged that firms often struggle with overlapping international obligations, creating complexity and cost. The proposal aims to make the UK a more attractive hub for export-oriented financial institutions, though the regulator has pledged to consider impacts on UK expatriates before finalising its approach.
Perhaps the most consequential development is the FCA’s intention to reassess existing exemptions, potentially broadening them to the point of “emptying” the Duty altogether. The regulator is exploring whether compliance with other obligations — such as client categorisation, suitability, or appropriateness assessments — could exempt firms from Consumer Duty scrutiny. This could signal a shift away from outcome-based regulation toward a more traditional, checklist-style compliance model.
While the FCA’s next steps remain uncertain, the implications for regulated firms are already taking shape. For those able to adapt quickly, the proposed reforms could unlock significant operational efficiencies and commercial benefits.
Companies that establish robust client categorisation systems from the outset will be well-positioned to take advantage. By streamlining onboarding with real-time classification and maintaining detailed audit trails, firms can demonstrate compliance while cutting down on unnecessary regulatory procedures. As the FCA prepares to consult on these changes in the coming year, many in the industry will be watching closely to see whether this truly marks the end of the Consumer Duty era.
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