FCA draws the fair value line: what three years of Consumer Duty supervision tells us about what good looks like – and what still needs to fix

The FCA found some assessments relied heavily on narrative statements or assertions, with limited supporting management information, quantitative analysis or customer outcomes evidence, and did not always explain clearly how the price paid by customers compared with the benefits they could reasonably expect to receive.  The FCA makes clear that good fair value assessments are clear, well structured and supported by relevant evidence and MI. They brought together, or clearly signposted, key information and explained how it supported the conclusion, enabling effective oversight and challenge.

FCA found that some firms did not consider the full price customers might pay over the lifetime of the product, with assessments sometimes considering fees separately or omitting contingent charges, including charges arising when customers fell into arrears.  The expected total price that must be factored in includes the price agreed at the point of contract, regular fees and charges payable over the lifetime of the product, contingent fees and charges, and any non-financial costs the customer is asked or required to provide.

Relevant non-financial costs may include the provision and use of personal data, the time and effort involved in accessing, assessing, purchasing, using, amending, switching or cancelling a product, and other sources of inconvenience or friction such as delays, system reliability issues or difficulties accessing account services.  The FCA found that some assessments gave limited consideration to non-financial costs, which was particularly evident where customers were not charged directly and firms relied mainly on the absence of a financial cost to support their fair value conclusions.

The FCA says that some firms treated their whole target market as a single, homogeneous group when testing fair value, making it difficult to spot if some customers were quietly paying more, or getting less, than others, which is exactly the kind of thing a fair value assessment is supposed to identify.  It says that some firms applied differential or risk-based pricing but did not assess value for each pricing group, meaning an overall product-level conclusion could therefore overlook material differences in the prices paid or outcomes experienced by different groups.

Some firms in the FCA's review identified customers with characteristics of vulnerability but did not analyse their outcomes closely or compare them with those of other customers.  In the FCA's fees and charges review, many firms did not consider which customer groups were more likely to incur repeat fees or experience a higher cumulative fee burden, making them unable to identify patterns of charging that might result in different outcomes or affect fair value for particular groups.

Some firms' monitoring arrangements were not sufficiently clear or supported by appropriate data and MI, limiting their ability to identify poor outcomes, test whether their fair value conclusions remained appropriate, or act where necessary.  Data collection alone does not demonstrate good outcomes: firms should explain what the evidence shows, how it supports their conclusions and how they respond.

Some firms found that their products were priced materially above comparable market offerings but could not explain whether customers received additional benefits, enhanced service levels, greater flexibility or better outcomes that justified the difference.  Benchmarking and outlier analysis can provide useful context when assessing the price and value of products and services and can help firms identify potential fair value concerns and challenge assumptions, but they do not replace the firm's own assessment of whether the product provides fair value.

The FCA saw firms disclose material fees relatively late in the application journey or give less prominence to the total amount repayable than to other information, with complaints data sometimes indicating that customers were surprised by particular fees or became aware of them only late in the journey.  Testing should provide meaningful evidence of customer understanding rather than relying only on readability or engagement measures, and firms may wish to consider whether customers can readily find and understand information about fees and charges across the customer journey, particularly where it appears in different web pages or documents.

The FCA's analysis of Product Sales Data for the four quarters from Q3 2025 to Q2 2026 showed that penalty charges were applied to around 3% of consumer credit agreements, representing almost 28 million individual charges, with late repayment charges being the most common.  Some firms could not demonstrate that they had considered whether the level, frequency and cumulative impact of fees remained fair for customers in arrears, and in some cases firms had controls in place but could not demonstrate that these were appropriately calibrated to reduce the risk of fees making it harder for customers to recover from missed payments.

The FCA says some consumer hire firms did not give sufficient prominence to the significance of long-term financial commitments, for example, some financial promotions used 'pay as you save' claims without making it sufficiently clear that potential savings and affordability depended on factors such as equipment performance, changes in customers' circumstances and future energy prices over agreements lasting up to 25 years.  Some firms did not adequately assess whether products involving long-term commitments would continue to provide fair value where expected benefits depended on factors such as future product performance, ongoing maintenance arrangements and market conditions.

Smaller firms may not need complex modelling, extensive analysis or multiple governance layers, and can use existing information such as complaints, customer feedback, arrears, cancellations, product usage, enquiries and vulnerability data.  However, proportionality does not mean a lower standard, firms must still be able to support their conclusions.

The FCA will continue to monitor fair value, including firms' approaches to fees and charges, through supervisory work and analysis of relevant Product Sales Data and CCR009 returns, which will help it identify risks, understand customer outcomes and inform its future supervisory approach.  Where it identifies significant risks of consumer harm or failures to meet regulatory requirements, it will take appropriate action.