Consumer Duty: Common Scenarios

Common Scenarios [PRIN 2A]

Practical guidance for common Consumer Duty compliance questions.

Scenario 1: Product Launch Review

Question: We’re launching a new savings product. What Consumer Duty checks are needed?

Analysis:

Target market defined? Identify specific customer group
Product testing done? Evidence product meets needs
Fair value assessed? Price reasonable for benefits
Communications clear? Tested for understanding
Support in place? Can customers access and manage easily?

Key requirement: Document all assessments in product governance records.

Citation: PRIN 2A.2

Confidence: High

Scenario 2: Existing Product Not Performing

Question: An existing product has poor customer outcomes. What must we do?

Analysis:

Identify root cause of poor outcomes
Assess if product should be withdrawn or amended
Consider whether to contact affected customers
Document actions and rationale
Report to board

Key requirement: Act promptly — delay could cause further harm.

Citation: PRIN 2A.9

Confidence: High

Scenario 3: Closed Book Products

Question: We have legacy products no longer sold. Do they need Consumer Duty compliance?

Analysis:

Yes — from 31 July 2024, closed products are in scope
Must assess fair value for existing customers
Must ensure adequate support available
May need to review terms if causing harm

Key requirement: Closed book customers deserve same protection.

Citation: PS22/9

Confidence: High

Scenario 4: Fair Value for Premium Pricing

Question: Our product is priced above market average. Is this fair value?

Analysis: Premium pricing can be fair value if:

Additional benefits justify the cost
Target market values those benefits
Benefits are clearly communicated
Price is not excessive relative to benefits

Key requirement: Document the value assessment with evidence.

Citation: PRIN 2A.3

Confidence: Medium — depends on specific circumstances

Scenario 5: Cancellation Process

Question: Customers complain our cancellation process is difficult. Is this a Duty breach?

Analysis: Consumer Support outcome requires:

Cancellation at least as easy as sign-up
No unreasonable barriers (sludge practices)
Clear process communicated to customers

If online sign-up but phone-only cancellation: likely breach.

Key requirement: Review and simplify cancellation journey.

Citation: PRIN 2A.5

Confidence: High

Scenario 6: Distribution Chain Responsibility

Question: We manufacture products but don’t sell direct. What’s our Duty responsibility?

Analysis: Manufacturers must:

Define target market clearly
Share information with distributors
Monitor distribution is appropriate
Act if distributors selling outside target market

Key requirement: Cannot outsource responsibility for outcomes.

Citation: PRIN 2A.2.10

Confidence: High

Scenario 7: Vulnerable Customer Identification

Question: How do we identify vulnerable customers for enhanced support?

Analysis: FCA defines vulnerability across four drivers:

Health — conditions affecting ability to manage finances
Life events — bereavement, job loss, relationship breakdown
Resilience — low financial capability or resources
Capability — low literacy, digital exclusion

Key requirement: Train staff, adjust processes, monitor outcomes.

Citation: FG21/1

Confidence: High

Scenario 8: Third-Party Fees

Question: We pass through third-party costs to customers. Are we responsible for their fair value?

Analysis:

Yes, if you have influence over the charges
Consider cumulative impact on total customer cost
Challenge unreasonable third-party fees
Disclose all costs clearly to customers

Key requirement: Your product’s overall value must be fair including third-party costs.

Citation: PRIN 2A.3

Confidence: Medium — depends on degree of influence

Scenario 9: Annual Board Report

Question: What must be in our annual Consumer Duty board report?

Analysis: Required content:

Assessment of customer outcomes across all four outcome areas
Evidence and data supporting conclusions
Actions taken during the year
Outcomes for vulnerable customers specifically
Plans for coming year

Key requirement: Board must review, challenge, and approve.

Citation: PRIN 2A.9

Confidence: High

Scenario 10: Communication Testing

Question: Must we test all customer communications?

Analysis:

Must ensure communications support understanding
Testing approach should be proportionate to risk
Higher risk communications need more rigorous testing
Can use range of methods: readability, customer testing, A/B

Key requirement: Evidence that communications are understood.

Citation: PRIN 2A.4

Confidence: High