The Financial Conduct Authority has opened a consultation on targeted changes to the Consumer Duty, nearly three years after the landmark regulation came into force in July 2023.
The regulator has acknowledged that the Duty is being applied more broadly and more intensively than originally intended in certain areas, particularly by firms operating in wholesale markets and complex distribution chains.
On 29 June 2026, the FCA published CP26/23, a consultation paper setting out a package of proposed changes to the Duty’s scope and how it is applied proportionately across the financial services industry.
A central proposal within CP26/23 is to restrict the Duty’s application to retail market business where the customer is ordinarily resident in the United Kingdom.
Firms serving overseas retail clients currently face overlapping obligations under both UK and local regulatory frameworks, creating what the FCA describes as unnecessary cost and complexity for businesses.
Under the proposed changes, firms conducting business exclusively for non-UK customers would no longer need to apply the Duty to that activity, simplifying cross-border compliance obligations significantly.
However, certain UK-connected products, including pre-paid funeral plans and UK pension-related services, would remain within the scope of the Duty regardless of where the customer is based.
The FCA is also proposing to consolidate the Duty’s application provisions under a new Handbook chapter, PRIN 3A, to give firms greater certainty about which activities fall within scope.
The regulator intends to move away from the “material influence” concept in favour of a framework more clearly linked to a firm’s specific role and extent of involvement with a retail product or service.
These revisions are particularly relevant for wholesale firms, which have reported difficulty in assessing whether their activities bring them within the Duty’s reach under the current framework.
CP26/23 also addresses how the Duty should apply more proportionately within distribution chains, with the FCA proposing to clarify that firms are responsible only for their own conduct.
Under the proposals, firms would not be required to oversee or duplicate the compliance activities of other firms within the same distribution chain, reducing administrative burden across the sector.
Obligations around supporting vulnerable customers, monitoring outcomes, and board reporting would be calibrated according to each firm’s role and proximity to the end consumer.
The consultation closes on 18 September 2026, with the FCA expecting to publish final rules and a policy statement in the first quarter of 2027.
Firms with cross-border operations, roles in complex distribution chains, or primarily wholesale activities are being encouraged to review the proposals and consider submitting a response to the consultation.