FCA Consumer Duty: How to Review Financial Communications for Compliance

The Financial Conduct Authority's Consumer Duty came into force on 31 July 2023, and the FCA has made clear it's the most significant shift in financial services regulation in a generation. The Duty requires firms to deliver good outcomes for retail customers across four areas: products and services, price and value, consumer understanding, and consumer support.

Consumer understanding is where documentation and communications review becomes critical. The FCA expects firms to ensure their communications "equip consumers to make effective, timely and properly informed decisions" — and the FCA is actively testing whether firms' communications meet this standard.

For financial services firms — banks, insurers, investment managers, advice firms, and fintech companies — this means every customer-facing communication must be reviewed against a higher standard than before. It's no longer enough for communications to be technically accurate and include required disclosures. They must be understandable by the target audience, timely, and appropriately tailored to the communication channel and consumer segment.

What Consumer Duty Requires for Communications

The Consumer Understanding Outcome

The FCA's rules (PRIN 2A.5) require firms to:

What "Clear, Fair and Not Misleading" Now Means

The existing COBS 4.2 requirement for communications to be "clear, fair and not misleading" hasn't changed — but Consumer Duty raises the bar. Previously, firms could argue their communication was technically clear. Now, the FCA expects evidence that consumers actually understood the communication and could act on it effectively.

Before Consumer Duty: "Is this communication technically accurate and not misleading?"

After Consumer Duty: "Can the target customer understand this communication, identify the key information, and make an effective decision based on it?"

Specific Communication Requirements

Where Firms Fail Consumer Duty Communications

1. Jargon-Heavy Customer Communications

Financial services has a jargon problem. Terms that are second nature to industry professionals are opaque to consumers.

The FCA has explicitly called out jargon as a barrier to consumer understanding. If your communications use these terms without explanation, they likely fail the Consumer Duty standard.

2. Buried Key Information

The most important information — costs, risks, limitations — hidden in dense paragraphs, footnotes, or pages deep in a document.

Failing example: A 12-page investment product summary where the total cost figure appears on page 9 in a table footnote.

Compliant approach: Total cost figure on page 1, in a clearly labelled summary box, with a pound-amount example ("If you invest £10,000, you'll pay approximately £150 per year in charges").

3. No Evidence of Consumer Testing

The FCA expects firms to test whether consumers actually understand their communications. Many firms have never tested. Evidence includes:

• Comprehension testing — asking a sample of target customers to explain what a communication means
• A/B testing — comparing different versions to see which produces better understanding
• Complaint analysis — are customers complaining about confusion or misunderstanding?
• Call analysis — are customers calling to ask about things that should be clear from the communication?
• Click/scroll analysis — on digital communications, are customers finding the key information?

4. One-Size-Fits-All Communications

Consumer Duty requires communications tailored to the target market. A sophisticated investor and a first-time ISA saver need different levels of explanation. Vulnerable customers may need adapted formats.

Failing: The same dense annual statement sent to every customer regardless of product complexity, customer experience, or vulnerability indicators.

Compliant: Segmented communications with appropriate complexity levels, vulnerability-adapted alternatives, and channel-appropriate formats.

5. Fee Disclosure Gaps

The FCA's price and value outcome intersects with communications. Fee disclosures that use only percentages (without pound-amount examples), bury ongoing charges in annexes, or don't show total cost of ownership fail the Duty.

Building a Consumer Duty Communications Review Process

Step 1: Inventory All Customer Communications

Step 2: Define Review Criteria

For every customer communication:

• Key information is prominent (not buried in body text or footnotes)
• Language is plain — no unexplained jargon or technical terms
• Costs shown in pound amounts, not just percentages
• Risks and limitations given equal prominence to benefits
• Readability appropriate for the target audience (FK Grade 9-10 for general consumers)
• Communication is tailored to the target market segment
• Vulnerable customer considerations addressed
• Call to action or next steps are clear
• Consistent with other communications about the same product/service

Additional for digital communications:

• Key information visible without scrolling
• Mobile-friendly layout
• Links are descriptive (not "click here")
• Interactive elements are accessible

Step 3: Implement a Tiered Review Process

Tier 1 — High-risk communications (legal + compliance + consumer testing): Product disclosures, fee schedules, terms and conditions, significant change notifications

Tier 2 — Medium-risk communications (compliance review): Marketing materials, annual statements, regular customer communications

Tier 3 — Lower-risk communications (checklist review): Operational emails, confirmation messages, routine notifications

Step 4: Establish Consumer Testing

The FCA expects evidence that you test whether consumers understand your communications.

Minimum viable testing programme:

1. Select 3-5 key communications per quarter
2. Test with 10-15 target customers per communication
3. Ask: "What does this communication tell you?" and "What action would you take?"
4. Document results and make changes based on findings
5. Retest changed communications

Using AI to Review Financial Communications

What AI Can Check

• Readability scoring — Flesch-Kincaid grade level, average sentence length, complex vocabulary
• Jargon detection — flag financial terms that need explanation or replacement
• Key information prominence — check whether costs, risks, and important details are early and visible
• Balance — verify benefits and risks are given proportional treatment
• Fee disclosure completeness — check for pound-amount examples alongside percentages
• Plain language — flag unnecessarily complex sentences and suggest simpler alternatives
• Consistency — check terminology and information is consistent across communications

What AI Cannot Replace

• Consumer testing (only real consumers can tell you whether they understand)
• FCA regulatory interpretation for novel situations
• Assessment of whether a product delivers fair value
• Vulnerability assessment requiring human judgement
• Board-level governance and accountability decisions

Practical Example

In TeamBench, you could configure a reviewer for Consumer Duty communications:

Reviewer name: FCA Consumer Duty Communications Reviewer

System prompt:

You are a financial communications reviewer for UK FCA-regulated firms. Review customer communications against the FCA Consumer Duty requirements, specifically the consumer understanding outcome (PRIN 2A.5). Check for: readability (target FK Grade 9-10 for general consumers), jargon (flag unexplained financial terms), key information prominence (costs, risks, and limitations must not be buried), fee disclosure (pound-amount examples required alongside percentages), balance (benefits and risks given proportional treatment), and plain language (active voice, short sentences, no unnecessary complexity). Use British English. Flag specific passages with the FCA requirement and suggest consumer-friendly alternatives.

Evaluation criteria:

• Plain Language (weight: 3) — No unexplained jargon, appropriate reading level, active voice
• Key Information Prominence (weight: 3) — Costs, risks, and important details are prominent
• Balance (weight: 2) — Benefits and risks proportionally presented
• Fee Disclosure (weight: 2) — Pound-amount examples, total cost visibility
• Consistency (weight: 1) — Terminology consistent, aligned with other communications

Quality gate: Minimum score: 80.

Upload the FCA Consumer Duty guidance, your firm's communications policy, and approved terminology list into a Knowledge Base. Use the readability checker for quick readability scoring of individual communications.

Frequently Asked Questions

Does Consumer Duty apply to all financial firms?

Consumer Duty applies to all FCA-authorised firms that have a relationship with retail customers, including firms in the distribution chain. This covers banks, building societies, insurers, investment managers, financial advisers, payment firms, and consumer credit firms. It applies to all new and existing products and services.

What does the FCA consider "good outcomes"?

The FCA defines four outcomes: (1) products and services that meet customers' needs, (2) fair value — price is reasonable relative to benefits, (3) consumer understanding — customers can make informed decisions, and (4) consumer support — customers can use the product effectively and get help when needed.

How does the FCA test compliance?

The FCA uses supervisory assessments, thematic reviews, data analysis, and firm-specific reviews. For communications, they examine: sample communications for clarity and fairness, evidence of consumer testing, management information on customer understanding (complaints, queries), and governance records showing how the firm ensures communications meet the Duty.

Do we need to rewrite all existing communications?

Not necessarily all at once. Prioritise by risk: high-risk communications (product disclosures, fee information, significant notifications) should be reviewed and updated first. Lower-risk operational communications can be updated as part of regular review cycles. But all communications should be reviewed against the Duty over time.

What's the penalty for failing Consumer Duty?

The FCA has the full range of enforcement tools: fines (unlimited for authorised firms), public censure, requirements to provide redress, variation or cancellation of permissions, and individual accountability for senior managers under the Senior Managers and Certification Regime (SM&CR).

How do we address vulnerability in communications?

The FCA expects firms to consider vulnerable customers in all communications. This includes: alternative formats (large print, audio, easy read), simpler language for complex products, clear signposting to support services, and training staff to identify and respond to vulnerability. Document your vulnerability communications strategy and the adaptations you make.

Key Takeaways

• Consumer Duty raises the bar for financial communications from "not misleading" to "consumers can actually understand and act on the information."
• The consumer understanding outcome requires evidence — consumer testing, readability metrics, complaint analysis, and ongoing monitoring of whether communications work.
• Jargon is the biggest barrier. Financial terms that are second nature to industry professionals are opaque to consumers. Explain or replace.
• Key information must be prominent — costs, risks, and limitations can't be buried in footnotes or page 9 of a 12-page document.
• Fee disclosures need pound amounts, not just percentages. "0.75% annual charge" means nothing to most consumers. "£75 per year on a £10,000 investment" is understandable.
• Consumer testing is expected. Test whether target customers actually understand your communications and document the results.
• AI-assisted review can check readability, jargon, prominence, balance, and fee disclosure systematically, but cannot replace consumer testing or FCA regulatory judgement.
• Prioritise by risk: high-risk communications (disclosures, fees, terms) first, then medium-risk (marketing, statements), then lower-risk (operational).

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This article provides general information about FCA Consumer Duty communications requirements and is not regulatory advice. Always consult the FCA for current guidance and seek qualified compliance advice for your specific situation.