11.1 Treating Customers Fairly and the Consumer Duty

Treating Customers Fairly (TCF)

Treating Customers Fairly (TCF) is the FCA's longest-running conduct initiative. It is not a standalone sourcebook but a cultural principle embedded across the FCA Handbook, expressing what it means for an authorised firm to honour the Principles for Businesses (notably Principle 6 — paying due regard to customers' interests and treating them fairly — and Principle 7 — communicating information clearly and not misleadingly). TCF is the ancestor of the Consumer Duty, and examiners still expect candidates to know both.

The Six TCF Outcomes

The FCA framed TCF around six outcomes that together describe what a fair firm looks like in practice:

A firm that can demonstrate all six outcomes is broadly treating its customers fairly. The FCA historically used these outcomes as a supervisory diagnostic — asking firms to show, with management information, that fairness was being delivered in each area.

Trap for candidates: TCF is not a sourcebook and not a single rule. It is a cultural principle expressed through the Principles and the wider Handbook. If a question asks where TCF sits, the correct answer is the Principles for Businesses (PRIN) and the firm's own governance, not a dedicated sourcebook.

The Principles for Businesses in Full

The Principles for Businesses (PRIN) are the FCA's high-level, always-applicable statements of the standards it expects. They are enforceable in their own right: a firm can be disciplined for breaching a Principle even where no detailed Handbook rule has been broken.

Principles 1 to 11 are the original set. Principle 12 was added by the Consumer Duty, and where the Duty applies it displaces Principles 6 and 7 for that business. Principle 11 is the one that drives the notification obligations in Section 10.4.

Regulating Individuals — SM&CR in Broad Outline

The Principles bind firms. Individuals are regulated separately through the Senior Managers and Certification Regime (SM&CR), which the FCA and PRA operate jointly for dual-regulated insurers and the FCA operates alone for intermediaries. It has three parts:

• The Senior Managers Regime. The most senior decision-makers hold FCA- or PRA-approved senior management functions, each with a statement of responsibilities setting out precisely what they are accountable for. A senior manager can be held personally accountable under the duty of responsibility where a breach occurs in their area and they did not take reasonable steps to prevent it.
• The Certification Regime. Staff who are not senior managers but whose role could cause significant harm — underwriters, claims decision-makers, client-facing brokers — are certified by the firm itself as fit and proper, and that assessment must be repeated at least annually.
• The Conduct Rules. A short set of individual rules applying to almost all staff (act with integrity; with due skill, care and diligence; be open and co-operative with regulators; pay due regard to customers' interests and treat them fairly; observe proper standards of market conduct), with additional rules for senior managers. Firms must train staff on them and notify the FCA of breaches and disciplinary action under SUP 15.

The design point is simple and examinable: PRIN regulates the firm, SM&CR regulates the people inside it, and the two work together so that a regulatory failure has both a corporate and a personal owner.

The FCA Consumer Duty (PRIN 2A)

The Consumer Duty is the FCA's most significant conduct reform in a generation. It was introduced by Policy Statement PS22/9 (published 27 July 2022) and added to the Handbook as a new PRIN 2A, supported by guidance in FG22/5. The Duty came into force on 31 July 2023 for new and existing products or services that were open to sale or renewal on that date, and on 31 July 2024 for closed products (products no longer open to sale or renewal but still held by retail customers).

The Three Layers of the Duty

The Duty is structured in three layers:

1. The Consumer Principle (Principle 12). A new principle states: "A firm must act to deliver good outcomes for retail customers." This is the highest-level obligation.
2. Three cross-cutting obligations (PRIN 2A.2). Firms must:
   • act in good faith towards retail customers;
   • avoid causing foreseeable harm to retail customers; and
   • enable and support retail customers to pursue their financial objectives.
3. Four outcomes (PRIN 2A.3 to PRIN 2A.6). These describe the key elements of the firm-customer relationship across the product lifecycle.

The Four Outcomes

A common exam trap is to confuse the four outcomes with the three cross-cutting obligations or with the six TCF outcomes. Remember: three cross-cutting obligations sit beneath the Consumer Principle, and four outcomes describe the product-customer relationship.

Who the Duty Applies To

The Consumer Duty applies to retail customers. The term "retail customer" follows the FCA's standard definition — a customer who is acting for purposes outside their trade, business, craft or profession. Most insurance sold to individuals and small businesses is retail business, so the Duty is the dominant conduct standard for general insurance distribution. The Duty does not apply to pure wholesale business with professional clients or eligible counterparties.

How the Duty Builds on and Supersedes TCF

The Duty does not abolish the Principles or the rest of the Handbook, but where the Duty applies, Principle 6 (customers' interests) and Principle 7 (clear communication) no longer apply — the Consumer Principle and the four outcomes replace them. The Duty is therefore best understood as a strengthening and codification of TCF: where TCF expressed fairness as a cultural principle measured by six outcomes, the Duty expresses it as enforceable rules with four outcomes, three cross-cutting obligations, specific governance requirements (board oversight and an annual Consumer Duty report under PRIN 2A.8) and active monitoring of consumer outcomes under PRIN 2A.9. Firms must also take redress or other appropriate action under PRIN 2A.10 where good outcomes have not been delivered.

Quick comparison: TCF = six outcomes, cultural, Principle-based. Consumer Duty = four outcomes, rule-based, in PRIN 2A, with a new Consumer Principle and three cross-cutting obligations. The Duty is the stronger, newer framework; TCF remains the historical foundation and the language supervisors still use.

Key Takeaways

• Treating Customers Fairly (TCF) is a Principle-based FCA initiative built on six outcomes (culture, leadership, decision-making, products and services, clear information, complaints); it is not a separate sourcebook.
• The FCA Consumer Duty was added to the Handbook as PRIN 2A and came into force on 31 July 2023 for new and existing products open to sale or renewal (and 31 July 2024 for closed products).
• The Duty has three layers: the Consumer Principle (Principle 12), three cross-cutting obligations, and four outcomes (products and services, price and value, consumer understanding, consumer support).
• The Duty applies to retail customers; where it applies, Principles 6 and 7 no longer apply, so the Duty builds on and supersedes TCF.
• Firms must act in good faith, avoid foreseeable harm, and enable and support retail customers to pursue their financial objectives, with board oversight, an annual Consumer Duty report, and active monitoring of consumer outcomes.