Consumer Duty Cross-Cutting Rules – Are You Meeting the FCA’s Expectations?
Is your firm doing enough to deliver genuinely good outcomes for customers? Are you prepared for the FCA’s tougher expectations under the Consumer Duty?
With increasing pressure on financial services firms to improve consumer protection and business conduct, the Consumer Duty cross-cutting rules now represent a new regulatory standard in the UK.
These rules go beyond compliance; they are about fundamentally rethinking how firms design, communicate, and manage products and services for retail customers.
The cross-cutting rules are not merely guidance; they are enforceable behavioural standards with deep implications for how firms approach customer relationships and commercial strategy.
Understanding and applying them effectively is essential not just for avoiding penalties but for creating a customer-first culture that is sustainable and competitive.
What Is the FCA Consumer Duty and What Does It Aim to Achieve?
The Consumer Duty, introduced by the Financial Conduct Authority (FCA), is part of a broader strategy to enhance consumer protection by embedding responsibility, fairness, and accountability into every layer of retail financial services.
The Duty is made up of three interconnected elements:
- Consumer Principle (Principle 12): Requires firms to act to deliver good outcomes for retail customers.
- Cross-Cutting Rules: Set the behavioural standards that guide firms in how they meet this principle.
- Four Consumer Outcomes: Define key areas where customers should benefit from product and service design, fair value, consumer understanding, and customer support.
This framework marks a shift from reactive regulation to proactive responsibility. Firms are now expected to anticipate harm, support consumer goals, and operate with a higher degree of integrity in their interactions.
What Are the Cross-Cutting Rules and How Do They Work?
The cross-cutting rules are the behavioural heart of the Consumer Duty. They are binding, non-exhaustive principles that shape how firms are expected to deliver good outcomes.
These rules apply across the entire product and service lifecycle, from design and marketing to distribution and support. The rules serve as a lens through which all other Consumer Duty requirements should be interpreted and applied.
The three cross-cutting rules are:
- Act in Good Faith
- Avoid Causing Foreseeable Harm
- Enable and Support Customers to Pursue Their Financial Objectives
These are not just abstract principles. They are defined in detail within the FCA Handbook (PRIN 2A) and come with practical examples, regulatory obligations, and implications for governance.
Let’s look at each in turn.
What Does It Mean to Act in Good Faith?
Acting in good faith goes beyond avoiding dishonesty or deception. It involves a higher standard of ethical conduct that requires firms to treat customers fairly, transparently, and consistently.
According to the FCA (PRIN 2A.2.2R), acting in good faith involves:
- Honesty in product presentation and communication
- Fairness in designing products that meet real customer needs
- Openness in disclosing potential risks or conflicts of interest
- Avoiding exploitation of consumer behavioural biases or vulnerabilities
Firms must not, for instance, delay actions that would benefit the customer while acting swiftly when the benefit is to the firm. This inconsistency breaches the expectation of fairness and erodes trust.
It’s also important to note that acting in good faith does not prevent firms from pursuing commercial interests.
Profit-making is acceptable, as long as it’s done in a way that respects the customer’s rights and meets the standards of fairness outlined in Principle 12.
What Constitutes Foreseeable Harm and How Should Firms Avoid It?
The rule to avoid causing foreseeable harm places a duty on firms to anticipate, prevent, and respond to risks that could reasonably be predicted to cause customer detriment.
Harm can arise from both actions and inactions. For example, failing to monitor the ongoing suitability of a financial product could lead to harm if the customer’s circumstances change.
The FCA defines foreseeable harm as:
- Negative outcomes that the firm could reasonably foresee based on customer data, product risks, or previous issues
- Harm caused directly or indirectly, including through third-party relationships
- Detriment arising from poor product design, misleading marketing, inadequate support, or exploitative practices
Firms must take steps to regularly review their products, services, and processes to detect and mitigate risks before they cause harm.
The obligation applies not just to new products but also to legacy or closed products that are no longer actively sold.
Practical examples include:
| Scenario | Potential Harm | Action Required |
| A firm sells a complex investment to vulnerable customers | Misunderstanding leads to financial loss | Improve product design, enhance disclosures |
| Changes in product features not communicated | Customer unaware of changes affecting returns | Notify affected customers in a timely, transparent way |
| Poor exit processes | Customer faces delays in switching providers | Remove unreasonable barriers or costs |
Avoiding foreseeable harm is not about eliminating all risk, especially when products carry inherent risk. However, firms must ensure customers understand those risks and are not misled or left unsupported.
How Should Firms Enable and Support Customers to Achieve Their Financial Goals?
The third cross-cutting rule requires firms to empower customers, enabling them to make informed decisions and achieve their financial goals.
This means providing:
- Clear, accessible, and timely information
- Tools or guidance that support financial decision-making
- Products designed with customer needs in mind
- Frictionless options to switch, exit, or complain
Support must be tailored based on the service model. For example, a non-advised firm (e.g., a comparison website or investment platform) may assume a customer’s goal is to use the product as described.
In contrast, an advisory firm is expected to help identify and align with the customer’s disclosed objectives.
The FCA also encourages proactive support. If a firm decides not to offer a product, it should still consider providing guidance or referrals that support the customer’s financial interests.
This approach is especially important when dealing with vulnerable customers, who may require extra care and clear communication due to age, mental health, financial distress, or other factors.
How Do the Cross-Cutting Rules Align with the Four Consumer Outcomes?
The cross-cutting rules serve as the “how” to the outcomes’ “what”. They guide firm behaviour in achieving measurable improvements across four critical consumer outcomes.
| Consumer Outcome | Supported by Cross-Cutting Rules |
| Products and Services | Avoid Foreseeable Harm, Act in Good Faith |
| Price and Value | Act in Good Faith, Enable Financial Objectives |
| Consumer Understanding | Act in Good Faith, Enable Financial Objectives |
| Customer Support | Enable Financial Objectives, Avoid Foreseeable Harm |
This framework ensures customers experience consistency and clarity throughout the lifecycle of every product or service.
What Are the Consequences of Failing to Comply with the Cross-Cutting Rules?
The FCA has made it clear that failure to meet the expectations of the Consumer Duty, particularly the cross-cutting rules, will not go unnoticed. The consequences can be severe and multi-dimensional.
- Regulatory Sanctions: Firms may face financial penalties, restrictions, or public reprimands for breaches. Repeat offenders could even lose authorisation.
- Reputational Damage: Non-compliance undermines customer trust and may result in media scrutiny, loss of market share, and negative customer reviews.
- Customer Harm and Legal Exposure: Failure to prevent foreseeable harm or support customers adequately could lead to financial loss for consumers, legal claims, and redress obligations.
Firms are expected to demonstrate proactive compliance, not wait for enforcement action to correct behaviour.
What Steps Should Firms Take to Implement the Cross-Cutting Rules?
Achieving compliance requires more than updating policies it requires a cultural shift across all areas of the business.
Key steps include:
- Embedding the rules in governance frameworks and leadership structures
- Training all staff on what the rules mean for their role
- Conducting outcome testing and reviewing legacy products
- Setting up feedback loops through complaints and customer satisfaction surveys
- Building an inclusive approach that considers vulnerable groups
Firms should document decision-making processes, keep records of changes made to products and policies, and continually review data to assess performance against expectations.
How Should Firms Monitor Compliance and Prove Effectiveness?
Ongoing monitoring is critical to both regulatory compliance and good business practice. Firms should implement systems to:
- Track customer outcomes over time
- Review product performance and suitability
- Monitor trends in complaints or cancellations
- Evaluate whether disclosures are being understood
Monitoring should be both quantitative (data-driven) and qualitative (customer feedback, audits). The FCA has indicated that evidence of proactive monitoring will be a key indicator during supervisory reviews.
Conclusion: Are You Prepared for a Customer-Centred Future?
The Consumer Duty cross-cutting rules are not just another compliance requirement. They are a blueprint for a more ethical, transparent, and supportive financial services sector.
By acting in good faith, avoiding foreseeable harm, and enabling customers to achieve their goals, firms demonstrate that they are not only responsive to regulation but also committed to long-term customer value.
The shift may be challenging, but those who embrace it will be better positioned to build trust, loyalty, and lasting success in a more accountable industry landscape.
Frequently Asked Questions
What are the three FCA cross-cutting rules?
The rules require firms to act in good faith, avoid foreseeable harm, and enable customers to achieve financial objectives.
How do these rules differ from previous FCA principles?
They are more specific and actionable than prior conduct standards, with a focus on measurable outcomes.
Do the rules apply to closed products?
Yes. Even if a product is no longer being sold, firms must ensure current customers continue to receive fair outcomes.
What does foreseeable harm include?
It includes risks firms could reasonably predict and avoid, based on data, customer vulnerability, or product design.
How do firms enable customer objectives?
Through clear communication, suitable product design, accessible support, and frictionless switching or exit processes.
Are cross-cutting rules enforceable by the FCA?
Yes. Breaches can result in penalties, enforcement action, and reputational damage.
How should firms deal with customer vulnerabilities?
By identifying risks early, adapting communication methods, and offering additional support where needed.
READ MORE:
