FCA Consumer Duty 2026: What Your Board Report Must Now Prove

The FCA’s second Consumer Duty annual board report must be approved and submitted by 31 July 2026: UK financial services boards that file process declarations without demonstrable evidence of customer outcomes risk direct FCA supervisory engagement and named Senior Manager accountability under SMCR.

Why Is the 2026 Consumer Duty Board Report Different From Year One?

The Consumer Duty (PS22/9) came into force for open products and services on 31 July 2023. The first annual board report cycle was characterised by the FCA as an implementation exercise: regulators were primarily assessing whether boards had oversight processes in place. That phase is over.

In April 2026, the FCA published its Year 2 Consumer Duty Board Report observations, reviewing second-year reports submitted in July 2025. The message was unambiguous: the FCA is now in active supervision mode. Firms that submitted policy declarations and management information dashboards without demonstrable evidence of customer outcomes — or without documented board challenge — received direct FCA feedback and, in some cases, supervisory follow-up.

According to the FCA’s April 2026 observations, the regulatory debate has shifted from whether the Duty has been implemented to whether firms can clearly evidence strong outcomes under active supervision. The FCA reviewed firms across banking, insurance, investment, and consumer credit sectors and found that while most boards formally approved reports, fewer than 40% had documented the specific challenge questions asked of management — a significant weakness given the Senior Managers and Certification Regime (SMCR) accountability framework.

The 31 July 2026 board report is therefore a regulatory accountability document, not an administrative compliance exercise. It must demonstrate that your board actively interrogated the evidence, tested the conclusions, and took specific actions where customer outcomes fell short.

Executive Action:

• Confirm your board’s 31 July 2026 report submission deadline — for closed products and services, a separate report obligation may apply.
• Ensure the board meeting at which the report is approved contains documented minutes recording specific challenge questions asked of management and the responses given.
• Identify at least one area where customer outcomes data indicated a gap and document the remediation action taken — this is the FCA’s primary test of genuine board engagement.

What Four Outcomes Must the Board Specifically Evidence?

The Consumer Duty requires firms to evidence delivery of four outcomes: products and services, price and value, consumer understanding, and consumer support. The FCA’s April 2026 observations specifically noted that year-2 reports remained skewed toward products and price, with insufficient evidence on consumer understanding and support outcomes.

Products and services: The board must see evidence that products are designed to meet the needs of the target market, with specific data on usage, complaints, and foreseeable harms. Qualitative assertions are insufficient — the FCA expects segmented data by customer group, including analysis of outcomes across different demographics and customer characteristics.

Price and value: This requires documented fair value assessments, with evidence that prices charged reflect the benefits delivered relative to costs. The FCA has indicated that firms with persistently high complaint rates on value grounds should expect supervisory scrutiny in 2026/27.

Consumer understanding: This is the most frequently under-evidenced outcome. The board must see data demonstrating that customers understood the material features of products or services at the point of sale — not just that compliant disclosure was provided. Test-and-learn results, customer comprehension studies, and post-purchase contact data are relevant here.

Consumer support: Evidence should include resolution times, escalation rates, channel accessibility data, and specific outcomes for customers in vulnerable circumstances. The FCA’s Vulnerability Guidance (FG21/1) remains the benchmark standard, and the board must be able to demonstrate that vulnerable customers are not receiving systematically worse outcomes.

According to Clifford Chance’s May 2026 analysis, the Consumer Duty at three years has evolved from a compliance programme into a standing operating standard — and boards that continue to treat it as the former face increasing enforcement exposure as the FCA’s Annual Work Programme 2026/27 confirms intensified supervisory activity across consumer credit, pensions, and general insurance.

Executive Action:

• Require management to present evidence across all four outcomes — reject reports that address products and price but lack consumer understanding and support data.
• Specifically request the firm’s approach to identifying and evidencing outcomes for customers in vulnerable circumstances against the FCA’s FG21/1 Vulnerability Guidance.
• Document board challenge questions in formal minutes — the SMCR Senior Manager with Consumer Duty responsibility must be named and their accountability visible in the record.

How Should Boards Respond When Outcomes Data Reveals Gaps?

The FCA has been explicit: a board report that identifies no poor outcomes is not credible. In real portfolios, some customers will receive poor outcomes in some circumstances. The FCA’s expectation is not perfection — it is that boards identify gaps, understand root causes, and put credible remediation plans in place.

The April 2026 FCA observations identified several firms that had acknowledged outcome gaps in their data but failed to document root cause analysis or remediation timelines. This combination — identified problems without remediation evidence — creates the highest enforcement exposure under the Duty. The FCA has signalled that it will use its supervisory powers under FSMA 2000 to require firms to address identified gaps where board reports do not demonstrate adequate response.

Best practice for the 2026 report includes a root cause register: a structured document listing every identified customer outcome weakness, its probable root cause, the remediation action taken or planned, the responsible Senior Manager, and the timeline to resolution. The board should formally approve this register as part of the report approval process — not simply note its existence.

Our Consumer Duty Readiness Assessment provides a structured checklist for evaluating your board report against FCA expectations. Visit our Executive Briefing Library for detailed guidance on SMCR accountability and FCA supervision frameworks.

Executive Action:

• Prepare a root cause register for all identified customer outcome gaps, formally approved by the board alongside the annual report — not as an appendix, but as a board resolution.
• Brief your SMCR Senior Manager accountable for Consumer Duty on the FCA’s April 2026 observations and any specific sector findings relevant to your firm.
• If your firm operates in consumer credit, pensions, or general insurance, treat the 2026 report as a document the FCA may review — and prepare the supporting evidence pack accordingly.

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