The UK’s Financial Conduct Authority (FCA) appears to be signalling a significant shift in its regulatory stance, potentially moving away from the relatively new Consumer Duty.
This change comes as part of a broader effort by the regulator to reduce what it describes as unnecessary regulatory burdens, following growing pressure from the government to “support growth”, claims Muinmos.
On 29 September 2025, the FCA’s chief executive wrote to the Chancellor of the Exchequer outlining a four-point action plan that may mark the beginning of an overhaul — or even an effective retirement — of the Consumer Duty. The plan aims to bring more “clarity” and “flexibility” to how the Duty applies, particularly in collaborative product manufacturing for retail clients, effectively narrowing the range of firms under supervision.
The regulator also appears ready to redefine who qualifies as a retail consumer. The FCA is considering lowering the thresholds in its qualitative and quantitative tests to reclassify more clients as professionals. In its own words, “There is a subset of investors who have the knowledge, experience, sophistication or resources that mean they do not need retail protections.” This would be part of a wider consultation on client categorisation expected in Q4 2025.
Another key proposal would be to introduce an additional test based solely on total assets. As the letter explains, “We are considering complementing this with a new test at a high threshold of assets, to draw a brighter line for firms. This would give firms more confidence to identify these clients and, with their consent, take them out of the scope of the Duty and other retail protections.”
The FCA also plans to exempt non-UK customers from the Consumer Duty, citing the complexity of reconciling different jurisdictions’ regulatory demands. “We want to ensure they can feel confident locating their business in the UK,” the letter adds, noting that the regulator will still consider the implications for UK expatriates before finalising any changes.
Finally, the FCA intends to review and potentially broaden the current exemptions within the Duty. The consultation will examine whether these exemptions “go far enough”, raising the possibility of restricting the Duty’s application in certain B2B scenarios or when firms are already meeting other regulatory obligations such as client categorisation and suitability assessments.
If implemented, these adjustments could mark a pivot back towards “checklist compliance” rather than the outcome-based regulatory philosophy that the Consumer Duty was designed to embody. In effect, this could signal a regulatory U-turn under the banner of simplification and growth.
While the precise details remain to be seen, the FCA’s proposed changes open new opportunities for compliance and RegTech firms. If firms can correctly categorise clients at the outset, they could benefit from reduced compliance costs and fewer procedural hurdles. This would also enable them to offer a broader range of products to a wider base of professional clients.
To take advantage of these potential regulatory adjustments, firms will need fast, integrated client categorisation tools that can make accurate assessments during onboarding. Maintaining a robust audit trail will also be key, allowing firms to demonstrate compliance and justify reduced oversight under the new framework.
In short, the FCA’s letter may not just mark a possible farewell to the Consumer Duty, but also herald a fresh wave of innovation in compliance technology — as firms look to capitalise on regulatory simplification while maintaining transparency and trust.
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