Consumer Duty: Adapting to the FCA’s expanding scrutiny

The Financial Conduct Authority (FCA) is intensifying its focus on Consumer Duty, making it clear that firms must do more to ensure good customer outcomes. While the latest regulatory review is centred on Model Portfolio Services (MPS), the implications for the wider financial services sector, including asset finance, are significant.

At the same time, the FCA has removed the requirement for firms to appoint a Consumer Duty Board Champion, a change that took effect on 27 February 2025. While this offers governance flexibility, firms remain responsible for ensuring Consumer Duty considerations are embedded within their management processes. Asset finance companies should take these regulatory shifts as a signal to strengthen their compliance frameworks rather than scale them back.

The FCA’s review of model portfolio services: a warning for other sectors

The FCA’s review of MPS is a clear indicator of the regulator’s priorities. While MPS providers operate outside traditional fund wrappers, the FCA is scrutinising how they construct and distribute investment portfolios, manage conflicts of interest and oversee financial crime risks.

Asset finance firms should pay close attention to this review as it signals the FCA’s wider focus on customer outcomes, data transparency and governance. The same principles will likely apply to asset finance, where firms must demonstrate that their products are suitable, fair and free from conflicts of interest.

Key areas of focus for asset finance providers include:

• the ongoing issue around transparency in fees and charges, ensuring customers fully understand the financial commitment they are entering into;
• affordability assessments, proving that lending decisions are responsible and aligned with customer needs;
• fair treatment of vulnerable customers, ensuring that those who need extra support are identified and assisted appropriately;
• ongoing monitoring of customer outcomes so firms can proactively address issues before they lead to harm.

Firms that fail to demonstrate compliance risk facing the same scrutiny now being applied to MPS providers.

The removal of the Consumer Duty Board Champion: what this means for governance

The FCA’s decision to remove the requirement for a Consumer Duty Board Champion reflects its broader goal of reducing regulatory burdens and supporting economic growth. In a speech at the Association of British Insurers roundtable on 27 February 2025, FCA CEO Nikhil Rathi explained that eliminating unnecessary governance requirements would provide firms with more flexibility.

However, this does not mean firms can step back from their Consumer Duty responsibilities. Boards remain accountable for overseeing and challenging Consumer Duty adherence. Firms must still ensure that customer outcomes remain a key part of their management discussions, policies and governance structures.

For asset finance firms, this means:

• keeping Consumer Duty at the core of board-level discussions;
• embedding compliance within day-to-day operations rather than relying on a single champion;
• strengthening internal oversight mechanisms to ensure customer outcomes are continuously monitored and improved.

While firms now have greater flexibility, they should use this opportunity to refine governance processes rather than reduce their focus on compliance.

The importance of measuring Consumer Duty performance

With the FCA placing greater emphasis on proactive monitoring, asset finance firms must be able to evidence that they are delivering good customer outcomes. Simply claiming compliance is no longer enough, firms must provide measurable proof.

Measuring Consumer Duty performance involves:

• tracking customer outcomes to ensure financial products meet expectations and do not cause harm;
• using real-time data insights to detect issues early and adjust processes accordingly;
• maintaining structured reporting that demonstrates how firms assess, monitor and improve customer experiences.

Consumerduty.com supports asset finance firms by providing the tools needed to track customer outcomes, identify potential risks and ensure compliance with FCA requirements. Firms that invest in data-driven compliance will be better positioned to meet regulatory expectations and enhance customer trust.

Strengthening governance and transparency in asset finance

With the FCA tightening its approach to governance, conflicts of interest and financial crime, asset finance firms need clear and structured frameworks to ensure regulatory compliance. This includes:

• implementing robust affordability and vulnerability assessments;
• enhancing transparency in customer communications, particularly around fees and contract terms;
• strengthening internal oversight to prevent conflicts of interest and poor lending practices.

Failing to demonstrate good governance can lead to reputational damage, regulatory action and customer attrition. The asset finance sector must take proactive steps to embed strong governance and compliance processes.

Taking action: staying ahead of the FCA’s expectations

The FCA’s focus on Consumer Duty is not a short-term initiative. Asset finance firms must align themselves with evolving regulatory expectations and demonstrate a clear commitment to fair customer outcomes.

Firms that embrace technology, customer monitoring and data transparency will not only meet compliance standards but also enhance customer satisfaction and business resilience. Consumerduty.com is already working with financial firms to simplify compliance, helping them move from a reactive approach to a proactive, data-led strategy.

Consumer Duty is not just about avoiding penalties. It is about building a sustainable, customer-focused business that thrives in a more accountable financial landscape. Asset finance firms that act now will be the ones that stay ahead of regulatory changes and maintain a competitive advantage.