FCA Consumer Duty (PS22/9) & AI Governance Alignment Pack
FCA Policy Statement PS22/9 — A New Consumer Duty (FCA Handbook PRIN 2A) and Related AI Governance Expectations
The FCA Consumer Duty, in force for open products since 31 July 2023 and for closed products since 31 July 2024, imposes a Principle 12 higher standard of care requiring firms to act to deliver good outcomes for retail customers. It is enforced through four outcomes (products and services, price and value, consumer understanding, consumer support) and cross-cuts every stage of the customer journey. The Duty is deliberately outcomes-based and evidence-driven, requiring firms to produce a board-approved annual Consumer Duty report supported by robust data on outcomes actually delivered, not just processes followed. The FCA's 2024 Dear CEO letters and multi-firm reviews have made clear that supervisors will test whether outcomes monitoring is granular enough to identify foreseeable harm to vulnerable customers and specific customer segments. This is increasingly intersecting with the FCA's AI and machine learning discussion paper (DP5/22) and the 2024 joint BoE/FCA AI Survey findings: where firms deploy AI or algorithmic decisioning in pricing, credit, fraud screening, or customer communications, the Duty imposes a de facto explainability and fairness requirement. Supervisors expect firms to demonstrate that models do not systematically disadvantage protected or vulnerable groups, that model outputs are challengeable by customers, and that governance around model development, validation, monitoring and decommissioning is proportionate to consumer impact. For CROs, the Duty has become the primary conduct risk lens in the UK and the practical vehicle through which AI governance expectations are being enforced ahead of any dedicated AI regulation.
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Obligations
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Linked Themes
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Intelligence Packs
A firm must act to deliver good outcomes for retail customers.
Applicability
Principle 12 sets a higher standard than the previous Principle 6 'treating customers fairly'. It is proactive ('act to deliver') and outcomes-focused, meaning process compliance is insufficient — firms must evidence outcomes actually achieved.
A firm must (1) act in good faith towards retail customers; (2) avoid causing foreseeable harm to retail customers; and (3) enable and support retail customers to pursue their financial objectives.
Applicability
The 'avoid foreseeable harm' rule is the most operationally demanding. It requires firms to identify harms before they crystallise, which for AI-driven decisioning implies pre-deployment bias testing and ongoing outcomes monitoring by customer segment.
A firm must ensure that the price of a product or service that it offers to retail customers represents fair value. Fair value means that there is a reasonable relationship between the price paid for a product or service and the overall benefits.
Applicability
Where pricing is model-driven (risk-based pricing, dynamic pricing, personalised pricing), firms must evidence that algorithmic outputs do not create pockets of poor value, particularly for renewing or inertia-prone customers. The FCA's motor and home insurance pricing reviews illustrate supervisory expectations.
A firm must support retail customer understanding by ensuring that its communications meet the information needs of retail customers, are likely to be understood by retail customers intended to receive the communication, and equip retail customers to make decisions that are effective, timely and properly informed.
Applicability
Requires testing of communications, not just compliance sign-off. Where AI generates or personalises communications, firms must monitor comprehension and challenge outputs that reduce understanding.
A firm must, at least annually, prepare a report for its governing body setting out the results of its monitoring of retail customer outcomes and any actions required as a result. The governing body should review and approve the report and confirm the firm is complying with the obligations under Principle 12.
Applicability
The annual board report is the primary supervisory artefact. Boards must demonstrate genuine challenge; rubber-stamped reports have been criticised. Outcomes MI must cover vulnerable customers and be segment-granular.
Where firms use artificial intelligence or algorithmic decision-making in ways that affect retail customer outcomes, firms should ensure appropriate model governance, explainability commensurate with impact, testing for bias against protected characteristics and vulnerable customer indicators, and human oversight sufficient to identify and remediate poor outcomes.
Applicability
Reflects the FCA's technology-neutral supervisory stance: existing rules (Consumer Duty, SYSC, SM&CR) apply to AI use. Firms deploying AI in credit, pricing or communications must be able to show a full model lifecycle governance evidence trail.
Board Governance
Board-level regulatory posture reporting and risk appetite oversight against this framework.
Committee Oversight
Risk committee challenge records and control effectiveness monitoring relevant to this regulation.
Supervisory Dialogue
Pre-submission briefings, regulatory correspondence, and supervisory engagement records.
Thematic Review
Structured response documentation and supporting evidence packs for thematic review obligations.
Risk Appetite
Calibrated risk appetite and tolerance statements referencing the obligations in this framework.
Regulatory Submission Statement
Firms must maintain: (i) the annual board Consumer Duty report with outcomes data by customer segment including vulnerable customers; (ii) fair value assessments for each product with benchmark comparisons and cross-subsidy analysis; (iii) model inventory covering all consumer-impacting AI/ML models with risk tiering; (iv) model validation reports including fairness/bias testing across protected characteristics; (v) customer understanding testing results (comprehension studies, drop-off analysis); (vi) foreseeable harm registers with mitigation actions; (vii) product governance committee minutes evidencing outcomes-based challenge; (viii) MI dashboards distributed to the board with outcomes lead and lag indicators; and (ix) Consumer Duty Champion (NED) attestation.