What does 'fair value' look like in practice? Three years into the Consumer Duty, here’s what we’ve learned.
By FCA
AI summary of the source article
Three years into the Consumer Duty, a regulatory review across consumer finance showed clear differences in how firms assess fair value. Stronger firms supported fair value with customer data and segmentation, while weaker firms relied on assumptions.
Why it matters
Firms are expected to read the full findings and "use these findings to challenge your approach to assessing and monitoring fair value."
Key facts
- Stronger fair value assessments directly quantified customer benefits against fees and interest, whereas weaker assessments relied on assumptions.
- Leading firms segmented customers by credit risk, usage, and vulnerability, while weaker approaches treated entire target markets as homogeneous groups.
- Some home energy infrastructure agreements lasting up to 25 years promoted 'pay as you save' claims that created misleading impressions that savings were guaranteed.
Source excerpt · FCA
Fair value is a simple yet important principle at the heart of the Consumer Duty: the price customers pay should be reasonable, relative to the benefits they get. But applying that principle in practice requires judgement.Three years into the Consumer Duty, we’re seeing clear differences between firms that have embedded fair value into their approach and those that still need to strengthen their a…