The FCA’s Consumer Duty came generally into force in July 2023 and sets rules to protect retail customers across financial services. It came into force for closed products and services, ie those no longer marketed, on 31 July 2024. The FCA says that firms are continuing to adjust and improve the way they are implementing the Consumer Duty to deliver good consumer outcomes. 

Among other things, the Consumer Duty includes rules on fair value.  The fair value rules aim to make sure the price customers pay is reasonable compared to the benefits they receive and includes a fair value assessment. The fair value assessment is intended to ensure firms properly consider fair value in their decision-making about products and services that are offered or provided to retail customers. It helps them check and demonstrate that they are complying with their obligations.

The FCA has carried out a review of the price and value outcome rules and how they have been implemented. It focused on three areas: cash savings accounts, guaranteed asset protection insurance and cash balances held by platforms. Its key messages to firms arising out of the review are:

• It is important not to consider the price and value outcome in isolation. It should be considered alongside the other outcomes and obligations under the Consumer Duty (that is, products and services, consumer understanding and consumer support).
• Firms should consider the types of customers who, because of their circumstances or behaviours, are likely to get value from the product (inside the target market) as well as the types who are less likely to get value (outside the target market). If different products or services have different features or target markets, they should be considered separately.
• The Consumer Duty does not prevent firms from adopting any business models which may have different prices for different groups of consumers. It also does not prevent cross-subsidies between different products or services. However, firms must demonstrate that all groups of customers get fair value from their products (and be particularly alert to risks that cross- subsidies may disadvantage vulnerable customers).
• Claims made in fair value assessments about the costs and benefits of the product or service, or any other contextual factors, should be backed by reasonable evidence. The extent or level of detail of the supporting evidence should be proportionate to the size of the firm and complexity of the factors being considered. 
• If consumers are not receiving fair value, firms should take prompt actions – which should be specific, and they should monitor their success and impact.

The FCA expects firms to think about price when assessing fair value.  However, it emphasises that it should not be the sole consideration. Its rules do not set prices, require prices to be low, or require firms to charge the same as competitors. It requires firms to assess whether they are providing fair value, and take action if they are not. It wants firms to exercise judgment and find the most effective way of making sure their products and services offer fair value to retail customers, seeking continual improvement and learning lessons from their own and other firms’ experiences.

It is working with firms to ensure they are taking an appropriate and proportionate approach to the price and value outcome. However, it says that it will act where it sees firms not making improvements in response to feedback, or if firms’ products and services are clear poor value outliers when compared to the price and value of similar products and services.

The FCA says that it is aware of the need for specific engagement with small firms as they have more limited resources. Its review highlights how small firms might take a reasonable approach to the requirements of the price and value outcome.

The rules on fair value are the trickiest of the four consumer duty outcomes to comply with and to balance with the other outcomes.  The FCA appears to have recognised this and its guidance is pragmatic. However, firms should be careful not to focus on complying with rules at the expense of the overall principle of delivering good outcomes for retail customers.

For an overview of the consumer duty, see our earlier article here.