UK: Year 2 Consumer Duty Board Reports: progress and what comes next

Why should I read this?

The FCA has published its assessment of firms’ Year 2 Consumer Duty board reports. Firms were first required to produce an annual board report on Consumer Duty outcomes in July 2024, with Year 2 reports due by July 2025. The FCA has now reviewed a sample of those Year 2 reports and published its findings.

Overall the FCA concludes that firms have made meaningful progress since Year 1 reports, while making clear that standards remain inconsistent across the market.

The FCA’s assessment sets out clear examples of good and poor practice and should be treated by firms as a prompt to review the quality, depth and evidential basis of their own board reporting.

What has the FCA found?

Good practice

The FCA highlighted several areas of good practice in Year 2 board reports, including:

• Use of meaningful management information (MI) to assess whether firms are delivering good consumer outcomes. Stronger reports draw on a broader mix of qualitative and quantitative data and use that data to analyse root causes, trends and differences across customer groups.
• Active board engagement and challenge, with boards interrogating Consumer Duty outcomes rather than treating the report as a passive compliance exercise.
• Retention of Consumer Duty Board Champion notwithstanding the FCA’s decision to give firms flexibility on whether to continue the role. The FCA views this as evidence that senior accountability remains central to embedding the Duty and driving cultural change.
• Clear identification of harms and risks supported by specific, time‑bound action plans with named owners and progress tracking.
• Integration of the Consumer Duty into business‑as‑usual governance and operations, rather than treating it as a standalone project.
• Consideration of vulnerability and differential outcomes, with some firms demonstrating more mature approaches to assessing how different consumer groups are affected.

Poor practice

The FCA also identified areas where firms continue to fall short, including:

• Overly high‑level and descriptive reporting, with insufficient data or MI to evidence whether customers are receiving good outcomes. In some cases, extensive data was presented without firms drawing conclusions, identifying emerging risks or explaining what the data showed.
• Weak oversight of distribution chains, particularly where firms rely on intermediaries or outsourcing partners. The FCA reiterates that firms remain responsible for the outcomes their products deliver, regardless of who interacts with the customer. The FCA has indicated that it will consult on changes to relevant rules and guidance later this year and publish further best‑practice examples.
• Insufficient evidence of board challenge, where reports were reviewed and approved but the nature and depth of board scrutiny was not clearly documented.
• Insufficient focus on consumer understanding and customer support, with some firms continuing to prioritise product design and fair value at the expense of these core Consumer Duty outcomes.

The FCA’s expectations going forward

The FCA expects firms to continue raising the standard of Consumer Duty governance and reporting.  In particular, it expects:

• Board reports to be grounded in robust data and MI, rather than narrative descriptions of activity.
• Boards to actively challenge whether good outcomes are being delivered in practice.
• Firms to continue strengthening monitoring frameworks, governance and distribution oversight, so that the Consumer Duty delivers tangible benefits for consumers as supervisory scrutiny matures.

What should I do?

Firms should consider taking the following steps:

• Review your Year 2 board report

Assess whether your current report aligns with the FCA’s examples of good practice. Does it contain meaningful MI?  Does it clearly identify harms, risks and actions?

• Strengthen your MI framework

Ensure you have sufficient data to assess outcomes across all four Consumer Duty outcome areas.  Use complaints data, product reviews, customer testing and operational metrics to build a comprehensive picture – and demonstrate how this data is challenged and used to drive improvement.

• Brief and support your board

Ensure your board understands the report, the underlying data and its role in challenging Consumer Duty outcomes and management responses.

• Plan early for Year 3

Begin preparations now, using the FCA’s feedback to address any gaps in your current reporting and governance arrangements.

What else should firms be aware of?

The FCA’s review sits within its wider supervisory approach to the Consumer Duty. The FCA has made clear that it will continue to use data to identify outlier firms, and the Consumer Duty remains a central regulatory priority for 2026, featuring prominently in the FCA’s Regulatory Priorities.

Naomi Seward, Financial Services Partner, comments:

“The FCA’s message is clear: firms that treat the Consumer Duty board report purely as a compliance exercise can expect increased scrutiny. The FCA expects that boards will be genuinely engaged with their reports and prepared to act on the data presented within them. Firms with robust MI and governance frameworks will be far better placed to demonstrate that meeting good customer outcomes is culturally embedded within the firm, as the FCA’s supervisory approach continues to develop.”

How Eversheds Sutherland can help

We provide market leading support to help firms meet their Consumer Duty obligations, including assurance reviews, bench marking and assessing board reports and governance and MI framework reviews.  

The firm offers a comprehensive retail finance capability within its global financial services practice, supported by regulatory horizon-scanning, which tracks key FCA reforms and emerging supervisory priorities.