UK FCA highlights evidence and segmentation gaps in Consumer Duty fair value assessments

In a new blog post, Financial Conduct Authority (FCA) Director of Consumer Finance Alison Walters highlights recurring weaknesses in the evidence supporting some consumer finance firms’ fair value assessments, three years into the Consumer Duty. Supervisory reviews found that weaker assessments relied on assumptions rather than customer data, or left relevant evidence scattered across documents without explaining how it supported their conclusions. Stronger assessments demonstrated a clear relationship between the total price customers paid and the benefits they could reasonably expect. Smaller firms may be able to use existing complaints, arrears, customer feedback and product usage data without necessarily needing complex modelling or new data. Some firms also assessed their entire target market as a single group, making it difficult to identify customers paying more or receiving less. Stronger approaches tested value across groups differentiated by credit risk, usage, distribution channel, vulnerability and pricing. Customer understanding was another focus: direct checks of whether customers understood charges provided evidence beyond the existence or readability of disclosures. In home energy equipment hire, some promotions used “pay as you save” claims that could imply guaranteed savings or affordability over agreements lasting up to 25 years. Firms should explain that these outcomes depend on equipment performance, customers’ circumstances and future energy prices, rather than suggesting they are assured.