Context
The FCA has published examples of good an poor practice relating to the Consumer Duty’s consumer understanding outcome.
The guidance is relevant to all regulated firms, includes extra commentary for smaller firms, and has its focus on product design, manufacture, distribution and support, as well as production of communications and customer journeys.
The Consumer Duty sets a higher standard for retail consumer protection. The FCA wants firms to help customers make effective, timely and properly informed decisions, and present information that is fair, clear, and not misleading. Customers should have the information they need, at the right time and presented in a way they can understand.
Key points to note and next actions
The guidance was formed using evidence to understand how firms are embedding the consumer understanding outcome, combining supervisory findings, form data, behavioural research, and extensive engagement with industry bodies, charities and consumer groups. The FCA also reviewed wider insights from its 2024 Financial Lives Survey, which found that 12% of adults had limited understanding of the products they held and 19% had low confidence with everyday numeracy. Three in 10 said their preferred communication channel had been withdrawn, which caused difficulty for most of them.
In September 2025, the FCA surveyed 38 firms including insurance, retail banking, payments and consumer finance providers focusing on governance, testing, MI, communication design and support for customers in vulnerable circumstances. The sample included small, medium and large firms.
The guidance is split across these 5 areas:
- Management information (MI) and testing.
- Innovation and communication design.
- Vulnerability and accessibility.
- Financial promotions.
- Governance and oversight.
Key findings summary
Using insight to identify where consumers struggle: Good practice involves firms analysing insights from multiple sources, including call listening, complaints, chat transcripts, website analytics, drop-off data (customers who start but do not complete a specific process) and surveys. They review this evidence regularly and prioritise meaningful improvements rather than simply making cosmetic changes.
Testing communications with real customers: Good practice involves testing both before and after changes. Firms use proportionate tools such as surveys, comprehension checks, A/B testing (before and after) and feedback from frontline interactions. They verify whether changes improve customer understanding and adapt based on the results.
Communicating clearly, simply and accessibly: An effective approach includes plain language, clear structure, visual hierarchy and layered content. Firms place essential information upfront, highlight risks and exclusions early, and support those who need alternative or accessible formats.
Designing journeys and tools that support understanding: Well-designed customer journeys incorporate calculators, videos, walkthroughs and summaries. These tools are tested to make sure they genuinely help customers and refined based on user evidence.
Supporting customers with characteristics of vulnerability: An effective approach is to identify needs early, adapt communications accordingly and embed vulnerability considerations into governance, training and testing. This includes testing with vulnerable cohorts and ensuring accessibility throughout journeys.
Clear, fair and balanced financial promotions: A good approach aligned with the Duty makes sure promotional content is balanced, accessible and easy to understand. Firms give risks equal prominence to benefits, avoid jargon and test that key messages – including eligibility criteria and limitations – are properly understood.
Governance and oversight: Good practice includes clear ownership of the consumer understanding outcome. Firms maintain defined governance, review management information (MI) regularly, track actions, and make sure decisions lead to improvements. Oversight is embedded into everyday business processes.
Firms should use this guidance to review their oversight and testing of, and processes related to the Consumer Understanding outcome.