FCA Consumer Duty Year 3: What Boards Must Submit by 31 July 2026
Under FCA Consumer Duty rules, every regulated
Under the FCA’s Consumer Duty (PS22/9) — which has applied to all retail products and services since 31 July 2023 — regulated firms must produce an annual board report that demonstrates the firm is delivering good consumer outcomes across all four cross-cutting rules: acting in good faith, avoiding foreseeable harm, enabling customers to pursue their financial objectives, and meeting the four consumer outcomes (products and services, price and value, consumer understanding, and consumer support). Year 3 reports are due by 31 July 2026 and will be assessed against the FCA’s April 2026 observations on Year 2 quality. Boards that simply repeat their Year 2 approach risk supervisory scrutiny.
What Does the FCA Now Require in a Year 3 Consumer Duty Board Report?
The FCA’s expectations for Year 3 have evolved materially from Year 1. The regulator is no longer impressed by reports that describe governance structures and monitoring frameworks in abstract terms. Year 3 requires firms to demonstrate measurable consumer outcomes with trend data, root cause analysis, and evidence that board-level challenge has driven genuine improvements.
The core Year 3 requirements are: outcome monitoring data showing how the firm is measuring all four consumer outcomes; trend analysis comparing Year 3 metrics to Year 1 and Year 2 baselines; identification of poor outcomes and the specific corrective actions taken; distribution chain monitoring evidence showing the firm understands how outcomes are delivered through intermediaries and third parties; and explicit documentation of the board’s challenge — questions asked, issues raised, and follow-up actions recorded in board minutes.
According to the FCA’s April 2026 review of Year 2 Consumer Duty board reports, while most boards reviewed and approved their reports, many did not adequately document the challenge they had provided. The FCA stated explicitly that boards should ensure their minutes and papers clearly set out the discussions held, the questions asked, and any follow-up actions requested. Year 3 reports that lack this evidence will be viewed as non-compliant.
Executive Action
- Review your Year 2 board report against the FCA’s April 2026 good practice observations and identify gaps before drafting Year 3.
- Ensure board minutes from Consumer Duty agenda items document the specific questions asked by NEDs and the management responses — not just “the board approved the report.”
- Build a Year 3 evidence pack that includes quantitative outcome metrics with year-on-year trend data for each of the four consumer outcomes.
Where Did Year 2 Reports Fall Short — and What Must Boards Fix?
The FCA’s April 2026 thematic review identified four recurring weaknesses in Year 2 Consumer Duty board reports that boards must address for Year 3. Each represents a specific area where the regulator’s expectations were not met and where supervisory action is more likely.
Weak distribution chain monitoring. The FCA found that monitoring of outcomes in distribution chains was often inadequate, particularly where firms rely on intermediaries or outsourcing partners. Boards must be able to demonstrate that they understand how their products and services are sold and supported downstream, not just within the firm. The FCA has indicated it will consult on strengthened rules for distribution chains — firms that wait for new rules before acting are taking a compliance risk.
Insufficient data quality. Many firms relied on limited or anecdotal evidence rather than systematic quantitative data. Year 3 reports must demonstrate that the firm has invested in data infrastructure capable of producing reliable, consistent outcome metrics across customer segments, product lines, and distribution channels.
Inadequate board challenge. The most common FCA criticism was that board challenge was not evidenced. Approving a management report is not the same as challenging it. Boards must ask probing questions about data quality, methodology, and corrective action plans — and record those questions formally.
Limited vulnerability identification. Firms must demonstrate how they are identifying and serving customers in vulnerable circumstances. Year 3 reports without specific vulnerability data, processes, and outcomes evidence will be viewed as incomplete.
Executive Action
- Commission a specific distribution chain audit for Year 3 — map every third party through which your products reach retail customers and assess their Consumer Duty compliance.
- Conduct a pre-submission board session dedicated to Consumer Duty, structured as a challenge meeting rather than an approval meeting — with questions pre-circulated to NEDs.
- Ensure your data team produces a vulnerability metrics section covering how vulnerable customers have been identified, supported, and tracked during Year 3.
How Should Boards Structure Their Year 3 Evidence Pack?
The most effective Year 3 Consumer Duty board reports are structured around evidence, not process. Rather than describing what the firm does, they show what outcomes have been achieved — and where they have fallen short. The FCA wants to see a firm that has honest insight into its own performance.
A robust Year 3 evidence pack has seven sections: executive summary (outcome performance vs Year 2 baselines); products and services outcome evidence (value assessments, product review outcomes, poor value remediation); price and value evidence (fairness assessments, pricing review findings); consumer understanding evidence (communications testing, complaint root cause analysis); consumer support evidence (service level data, resolution rates, escalation trends); vulnerable customers section; and distribution chain monitoring summary.
The board’s role is to review this evidence critically — not accept management’s characterisation at face value. NEDs with financial services backgrounds should lead the Consumer Duty challenge session; those without must be briefed in advance on the four consumer outcomes framework and the FCA’s Year 2 observations. The INFORMD executive self-assessment tool can help board members structure their preparatory review, and the INFORMD governance briefing library provides further regulatory context.
Executive Action
- Structure the Year 3 board report around the seven evidence sections above — ensure each section has named data owners and sign-off accountabilities.
- Brief all NEDs on the FCA’s April 2026 good practice observations before the Consumer Duty board session.
- Circulate the report at least 10 working days before the board session — Consumer Duty is not a 24-hour read.
What Are the Consequences of an Inadequate Consumer Duty Board Report?
The FCA’s Consumer Duty enforcement posture has hardened since Year 1. The regulator is moving from a “bedding in” stance to active supervision, with firms that cannot demonstrate good outcomes facing formal intervention. The consequences range from supervisory engagement letters through to s.166 skilled person reviews and, for the most serious cases, enforcement action under the FCA’s senior managers and certification regime (SMCR).
Under SMCR, the Consumer Duty board report sits within the accountability of the Consumer Duty champion — typically a non-executive director designated to lead Consumer Duty oversight. If the board report is inadequate and consumer harm is subsequently identified, the FCA can pursue the designated NED personally. This is not a theoretical risk: the FCA has made clear that NED accountability under SMCR is a live enforcement tool.
Beyond regulatory risk, there is a commercial dimension. Firms that are engaging meaningfully with Consumer Duty data are discovering actionable insight — products that are poor value, communications that customers do not understand, support journeys that generate avoidable complaints. Year 3 is an opportunity to turn compliance evidence into competitive advantage. Access the INFORMD contact page if your governance team needs further support structuring your Consumer Duty board pack.
Executive Action
- Confirm who your designated Consumer Duty NED champion is — and ensure they are fully briefed on Year 3 expectations and their personal SMCR accountability.
- Treat the Year 3 board report as a live management tool, not a compliance exercise — extract actionable insight from every data section.
- Document the board’s Consumer Duty challenge session fully in board minutes — this is your primary evidence of board-level oversight.
Frequently Asked Questions
What is a Consumer Duty board report?
A Consumer Duty board report is an annual document required by the FCA under PS22/9. It sets out the firm’s monitoring of consumer outcomes across the four Consumer Duty outcomes, evidence of corrective action where poor outcomes were identified, and the board’s formal review and approval. It must be produced annually and approved by the governing body.
